Mention "elder abuse" and most lawmakers conjure up images of the fleecing of Brooke Astor's estate or an elderly relative kept in squalid conditions. Cases like these make for excellent tabloid fodder. In fact, recently the New York Post prominently featured a story about Cher Thompson, a young woman who allegedly bilked a deaf octogenarian with dementia out of his life savings.

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What gets far less attention is perhaps the most prevalent form of elder abuse - the sort perpetrated by stockbrokers. The Financial Industry Regulatory Authority (FINRA), Wall Street's governing and enforcement body, defines financial elder abuse as the "misuse of an older adult's money or belongings by a relative or person in a position of trust."

A clear-cut example recently made headlines in a number of financial trade publications. Stockbrokers Thomas B. Cooper and Peter L. Boorn at Beverly Hills-based StockCross Financial Services Inc. allegedly bilked 95-year-old David Wolfson of nearly all his assets and put his house at risk after recommending unsuitable and risky investments. The brokers dropped Wolfson as a client once they drained him of his cash. An arbitration panel awarded the elderly man triple damages, totaling $1.6 million. It was an unprecedented amount that underscored the severity of the abuse.

Exploiting the elderly is actually quite common on Wall Street. The temptation to commission-earning brokers is obvious. There isn't a lot of money to be made managing the accounts of risk-averse investors who are looking to clip coupons and live off interest income from municipal bond funds, Treasuries or other safe investments. Some Wall Street firms just can't but regard the elderly as ripe for the fleecing.

Another recent example was the case of Sergio M. Del Toro, who has been banned from the securities industry for defrauding a 90-year-old Minnesota nursing home resident of $511,000. Mr. Del Toro recommended that the elderly man put his entire net worth into the stock of a firm called 3rd Dimension, for which there was no market or publicly quoted pricing. Mr. Del Toro's alleged motivation: a 15% commission, equal to about $76,600.

Elder abuse can also take the form of sales of securities that on first blush seem reasonable but are in fact inappropriate. Although FINRA specifically warned brokerages in 2007 against taking advantage of elderly investors, that didn't stop Wall Street from targeting the elderly in 2008 with investments that preyed on their need for liquidity. The most common of these were preferred shares of major financial institutions that offered attractive dividends. (What should an elderly investor's portfolio look like? Read High-Risk Retirement Portfolio Not Always Taboo for insight into this question.)

Sophisticated investors knew that in 2007 and 2008 many banks were teetering on the brink of insolvency. Because the banks needed capital to stay afloat, they increased the dividends on preferred shares, a tell-tale sign of financial distress. Preferred shares of companies like Lehman Brothers (now a part of Barclays (NYSE:BCS)), Fannie Mae (NYSE:FNM), Freddie Mac (NYSE:FRE) and Wachovia (now a part of Wells Fargo (NYSE:WFC) offered dividend payments of more than 8%. Brokers from some of the most recognizable firms in the country pitched these investments to retirees as if they were akin to fixed income instruments, which can provide an ongoing stream of cash for monthly bills.

In many cases, including a number for which our firm represents aggrieved plaintiffs, elderly clients were convinced to sell highly conservative investments, such as bank certificates of deposit, to purchase these supposedly safe, liquid securities. A very common pitch that the elderly investors heard was that Fannie and Freddie were "government backed" so their preferred securities were "safe." In reality, Fannie and Freddie stock was not government backed and the preferred shares were rendered nearly worthless as the market crashed. (For related reading, see Fannie Mae, Freddie Mac And The Credit Crisis Of 2008.)

An implicit "guarantee" is also commonly pitched when brokers attempt to sell what are known as "structured products." These synthetic derivatives carry names like "Principal Protected Notes," implying that the initial investment is safe. We represent retirees who were sold toxic products issued by Lehman Brothers, which, of course, became worthless after the firm collapsed.

Untold thousands of elderly investors lost "irreplaceable money" last year, in what can only be described as a racket. Typically out of the workforce, their only option is to file an arbitration claim against their bank or brokerage. Tragically, most such elder abuse is never reported, and the cases that do come to light often are pursued only after an elderly investor's next-of-kin realizes fraud is involved.

Inexplicably, there is little if any attention to financial elder abuse in the current financial regulatory reform packages. Congress and the White House would be wise to roll into their proposals a modest bill introduced by Sen. Orren Hatch, R-Utah, and co-authored by Sen. Blanche Lincoln, D-Ark. Dubbed the "Elder Justice Act," the proposal centers on advocacy and awareness of "elder abuse, neglect and exploitation at the local, state and national level."

By 2030 one in five Americans will be over the age of 65. At a White House Conference on Aging it was determined that one out of every six elderly people will become victims of financial exploitation. It's very clear that if legislators and regulators do not act quickly, financial elder abuse could become an epidemic.

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