by Guy M. Burns, Scott C. Ilgenfritz, and Jonathan S. Coleman
Since the end of World War II, the greatest accumulation of wealth in the history of the world has been amassed in the U.S. We are now witnessing the greatest transfer of wealth ever encountered.1 Survivors of the greatest generation (those born in the 1920s and 1930s) will leave behind $12 trillion, and the baby boomers will transfer more than $30 trillion — all in the next two to three decades.2 Because much of this money will be transferred more than once, as the members of each generation die off, some estimates predict that over $60 trillion will be transferred over the next few decades.3
This financial accumulation and wealth transfer is not limited to the oft-reported top 1 percent. Credible reports currently estimate the number of millionaires in the U.S. to be between 11 million and 15.6 million, with the number growing by about 400,000 per year.4 At the upper range of these extremes, nearly 6.5 percent of the U.S. population has achieved millionaire status. It is reasonable to assume nearly every practicing attorney in Florida has millionaire clients, and will face issues regarding the transfer of wealth from these clients to the next generation.5 The aging of many in this millionaire class creates a sea of opportunities for exploitation of the elderly by financial advisors, relatives, con-men and women, and outright thieves.
The irresistible lure of money has given rise not only to a sophisticated and legitimate industry of financial advisory services and tax planners,6 but also a nefarious underworld populated by various types of predators, some of whom may be affiliated with large, legitimate investment firms. There are several areas of financial vulnerability for older adults who are dealing with even moderate wealth. In addition to end-of-life medical expenses, the elderly are vulnerable to those who attempt to take their money by fraud or deceit, and by those who exert undue influence over the elderly person’s testamentary intent.
We can most certainly expect a continued increase in classic will contest cases. In addition, Florida lawyers will see an increase in the number of cases arising out of the pre-death financial exploitation of the elderly. Civil remedies under Florida’s Adult Protective Services statutes, codified in F.S. Ch. 415, can be an effective weapon in seeking redress for this exploitation. This article discusses some of the vulnerabilities of the elderly and potential civil legal remedies to financial exploitation.
Florida: A Target-Rich Population
While California has the largest number of elderly, Florida has, by far, the country’s greatest percentage of individuals over age 65 — currently, more than 19 percent of the state’s population, and growing every day.7 According to the U.S. Census Bureau, the country’s elderly population will double between now and the year 2050 to approximately 80 million. This increase is exponential: From 1960 through 1994, the oldest of the old — those aged 85 and over — increased at a rate of over 274 percent, during a time that the entire U.S. population at large only grew by 45 percent.8
With the nation’s largest percentage share of these elderly, Florida has long been on alert to potential abuses of this vulnerable population. In addition to the Florida Office of the Attorney General, which is “committed to bringing to justice those who defraud and exploit our senior citizens,”9 the state maintains a separate agency, the Department of Elder Affairs.10 Furthermore, F.S. Ch. 825 provides for criminal penalties for elder abuse and elder exploitation.11 However, private civil remedies still provide the primary monetary relief mechanism available for the exploited.
Florida’s Criminal and Civil Protections Against Financial Exploitation
Under F.S. §415.102(8), the term “exploitation” extends to breaches of fiduciary relationships, the unauthorized taking of personal assets, and the misappropriation, misuse, or improper transfer of money. Section 415.102(11) broadly defines “fiduciary relationship” as a person who is in a position of trust and confidence with a vulnerable adult. The fiduciary need not be a trustee, nor a person holding a power of attorney. Liability can be imposed upon anyone who is trusted by a vulnerable person, and then takes monetary advantage of the vulnerable adult.
A “vulnerable adult” under subsection (29) of the statute means a person 18 years or older “whose ability to perform the normal activities of daily living or to provide for his or her own care or protection is impaired due to a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, or brain damage, or the infirmities of aging.” It should be noted the standard for being vulnerable is not the same as competency, and no finding of incompetency is necessary in order to prove that a person is vulnerable. A vulnerable adult may still possess the legal capacity (competency) to sign a will or enter into a contract, but still be vulnerable to undue influence or financial overreaching.
Since the statute defines neither “infirmities” nor “impairment,” those categories are necessarily fluid, and must be determined on a case-by-case basis, often with the use of expert testimony coupled with the observations of nonmedical witnesses. As an example, a family member may testify about observations, such as, “About three years ago, Mom began having trouble with her memory and was often confused about how to use the TV remote control and the telephone.” This type of testimony, coupled with current medical testing, may allow the medical experts to form an opinion about the duration and rate of mental decline.
Certain circumstances — advanced Alzheimer’s or dementia, for instance — would appear to present clear-cut situations of vulnerability. The reality is, it is difficult to pinpoint the onset of those conditions. Furthermore, they are often diagnosed late in the game and are only revealed after some substantial wrongdoing has already occurred. Medical experts can shed light on how long the compromised mental conditions have been evident, and, therefore, how long the vulnerability has existed.
A private cause of action is provided under F.S. §415.1111 for recovery of actual and punitive damages, including attorneys’ fees and costs to the prevailing party. These statutory remedies are expressly cumulative and in addition to any other available legal or administrative remedies.
The list of people who might be potentially found to exploit a position of trust and confidence owed to an elderly person is long. It includes family members and outsiders alike: parents, spouses, adult children, financial advisors, relatives by blood or marriage, joint tenants or tenants in common, caregivers, and anyone who owes a legal or fiduciary relationship, “including, but not limited to, a court-appointed or voluntary guardian, trustee, attorney, or conservator.”12 Florida maintains a broad definition of “fiduciary duty,” and this broad definition is codified in §415.102(11). Both federal and state court decisions have recognized that an investment advisor owes a fiduciary duty to customers.13 Cases involving over-trading or “churning” of an account, the sale of unsuitable investments, or similar complaints against a broker or financial advisor, may, when appropriate, become cases of exploitation with the enhanced remedies provided by F.S. Ch. 415.
Remedies for the Vulnerable Elderly
Many older people face a reduction in wealth in late life due to extraordinary health-care expenses, but the concern for vulnerable adults is quite different: Wealth can be drained away by predatory family members, caregivers, or unscrupulous professionals.
One high-profile example is the 2009 trial of Anthony D. Marshall, a prominent New York banker who served on the boards of the Metropolitan Museum of Art and Lincoln Center, who was the only son of well-known philanthropist-socialite Brooke Astor. Mr. Marshall, along with his mother’s former estate attorney, Francis X. Morrissey, were both convicted of multiple counts of having swindled Mrs. Astor out of multi-millions of dollars during the time she was stricken with Alzheimer’s disease.
Attorney Morrissey, who was found guilty of fraud and conspiracy, actually forged Mrs. Astor’s signature on an amendment to her will.14 As it turns out, he was a repeat elder exploitation offender. His other misdeeds included convincing an 83-year-old to execute an amendment to a family trust the day before he died, which gave Mr. Morrissey an apartment on East 57th Street and a Diego Rivera drawing; having a 91-year-old widow bequeath her Park Avenue apartment, two Renoirs, $300,000 in cash, and the residue of her estate to him; and having another hospital-ridden elderly gentleman so ill he could only sign his name with an X appoint Mr. Morrissey as co-executor of his estate.15
Significant cases of elder financial abuse have hit far closer to home. On March 18, 2016, the Financial Industry Regulatory Authority (FINRA), in a binding arbitration conducted in Tampa, awarded compensatory damages in favor of the estate and charitable trust of the founder of the Home Shopping Channel against Wall Street investment firm Morgan Stanley in the amount of $32,840,000, plus interest, together with costs and witness fees in the amount of an additional $1,547,777.97, and a separate award of attorneys’ fees.16 In making the award, the FINRA arbitration panel found that Morgan Stanley and its financial advisor and branch manager had violated the elder exploitation provisions of F.S. Ch. 415 by permitting excessive trading in the elderly client’s accounts. The decedent suffered from dementia, Alzheimer’s disease, and other age-related infirmities during that time.17
Florida’s ever-increasing elderly population, many of whom hold significant wealth, creates an opportunity for financial exploitation. Florida attorneys should be familiar with Florida’s statutory protections for the elderly, who are vulnerable and who may be exploited. When supported by the facts, the remedies afforded by F.S. Ch. 415 provide a powerful remedy for attorneys representing vulnerable clients.
1 Mamta Badkar, We’re on the Verge of the Greatest Transfer of Wealth in the History of the World, Business Insider, June 12, 2014.
2 Annie Lowrey, What Comes After Rich Baby Boomers? Kids with a Big Inheritance, N.Y. Times Magazine, Mar. 11, 2014; John Aldan Byrne, The Greatest Wealth Transfer in Human History Is Coming, N.Y. Post, June 22, 2014.
3 Morgan Stanley Wealth Management, The $30 Trillion Challenge: What Will Millennials Do With Their Forthcoming $30 Trillion Inheritance? (Apr. 28, 2015), http://www.morganstanley.com/ideas/30-trillion-challenge; Cam Marston, Great Wealth Transfer Will Be $30 Trillion – Yes, That’s Trillion With A T (July 22, 2014), www.cnbc.com.
4 Michael Douglas, The United States Has More Than 13 Million Millionaires, Business Insider, Jan. 28, 2017. A report from Credit Suisse places the number of U.S. millionaires in 2015 at 15,656,000; Market Insights and the Spectrem Group estimate the 2017 number of millionaires to be around 11 million, and growing by as many as 400,000 per year.
5 Liz Skinner, The Great Wealth Transfer Is Coming, Putting Advisers at Risk, Investment News (July 13, 2015).
6 See, e.g., Peter Robinson, How the Superwealthy Plan to Make Sure Their Kids Stay Superwealthy, Bloomberg, Oct. 1, 2015.
7 Lauren Kent, Where Do the Oldest Americans Live?, Pew Research Center (July 9, 2015).
8 U.S. Census Bureau, Economics and Statistics Administration.
9 Office of the Attorney General, http://myfloridalegal.com/pages.nsf/Main/42F7E9863E852570AB0059ED90.
10 Florida Dept. of Elder Affairs, News, www.elderaffairs.state.fl.us/.
11 Fla. Stat. Ch. 825.101(4) defines “elderly person” as one 60 years or older who is suffering from the infirmities of aging, prohibits neglect, or other physical or psychological abuse. It also expressly prohibits and provides for prosecution of financial exploitation against the elderly. Section 825.103(1), like its civil companion §415.102(8), defines “exploitation” as obtaining, using, or endeavoring to use an elderly person’s funds, assets, or property, with an intent to deprive them of their use or benefit. Punishment of financial abuse under Ch. 825 is on a sliding scale: under §825.103(3)(a)-(c), $50,000 is a first-degree felony; $10,000 to $50,000 is a second-degree felony; and less than $10,000 is a third-degree felony.
12 Fla. Stat. §813.101(9).
13 See, e.g., Gochenour v. A.G. Edwards & Sons, Inc., 810 F.2d 1042 (11th Cir. 1987); Newsom v. Dean Witter Reynolds, Inc., 558 So. 2d 1076 (Fla. 1st DCA 1990); Csordas v. Smith Barney et al., 1992 WL 426460 (Fla. 9th Cir. 1992) (citing both Gochenour and Newsom).
14 Robert D. McFadden, Anthony D. Marshall, Astor Son Who Was Convicted in Swindle, Dies At 90, N.Y. Times, Dec. 1, 2014.
15 Serge F. Kovaleski and Colin Moynihan, Lawyer Charged in Astor Case Has Been a Beneficiary in Clients’ Wills, N.Y. Times, Dec. 1, 2007.
16 Lynnda L. Speer et al. v. Morgan Stanley Smith Barney, LLC, Ami Forte, and Terry McCoy, FINRA Case No. 13-00549.
17 Mark Schoeff, Jr., FINRA Panel Orders Morgan Stanley to Pay $34 Million to Estate of Former Home Shopping Network Chief, Investment News, Mar. 22, 2016.
Guy Burns, managing partner, and partners Scott Ilgenfritz and Jonathan Coleman of Johnson Pope Bokor Ruppel & Burns, LLP, with offices in Tampa, St. Petersburg, and Clearwater, frequently represent plaintiffs in financial and investment disputes. They were counsel for the claimant in the elder exploitation case against Morgan Stanley described in this article.
This column is submitted on behalf of the Trial Lawyers Section, Joseph F. Kinman, Jr., chair, and Kim Ashby, editor.