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Seniors & Financial Fraud

Investors of any age can become a victim of financial fraud at the hands of unscrupulous investment advisers or scam artists, but senior citizens are particularly at risk. One out of every five Americans older than 65 – more than 7.3 million people – has fallen into the financial fraud trap, according to a 2010 survey by Investor Protection Trust.

There have been several recent high-profile cases of elder financial abuse in the news. In February 2011, former child actor Mickey Rooney testified before a U.S. Senate committee that he was a victim of financial abuse by his two stepchildren. New York socialite and philanthropist Brooke Astor experienced similar issues. In October 2009, Astor’s son, Anthony Marshall, was convicted of defrauding his mother and stealing millions of dollars from her $200 million fortune while she suffered from Alzheimer’s disease.

Elder abuse is not limited to the rich and famous. Various research and studies estimate that the elderly are swindled out of nearly $3 billion a year. The figure is likely much higher, however, because most victims never report the crime to authorities.

Just this month, Texas authorities arrested Jimmy Don King and John Langford, principal of Langford & Associates, for defrauding 100 elderly Texas investors out $6.7 million over a period of about eight years. The two men – who are now serving lengthy prison sentences – employed a scam involving securities, along with 8% returns when most banks don’t even pay 2%.

The problem was no one affiliated with Langford & Associates had a license to sell securities in the first place. According to Texas authorities, it was a Ponzi scheme pure and simple.

“These are people he knew for a long time because they were his age and they trusted him,” said 47th District Attorney Randall Sims in a Dec. 11 article in the Amarillo Globe-News.

Today’s volatile stock market makes the elderly at an even greater risk for potential financial abuse. Watching their savings dwindle, they are eager to invest when presented with promises of “guaranteed returns” and financial security.

A special report titled Crime of the 21st Century in Kiplinger’s Personal Financial Magazine highlights some of the potential schemes that prey on the elderly, including annuities, free-lunch seminars, and the Nigerian letter. With each scam, there are some common red flags to be on the look-out for, including:

“You need to make a decision immediately.”

“The promise of guaranteed profit or no risks involved.”

“Reluctance to provide detailed information on the investment being pitched.”

Annuities in particular have come back to haunt the elderly population. Over the years, countless cases have been reported of elderly investors buying into a 20-year annuity that puts them at 100-plus years old before they can cash out their investment. Several states, including Texas, have signed into law bills allowing people who invest in annuities to get their money back within 20 days if they get buyer’s remorse. For seniors, these bills are welcome relief as many have been pressured into buying the products without fully understanding what they’re getting into.

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