The art of swindling is as old as time, and governments have worked for centuries to combat the practice. Indeed, North Carolina first criminalized the obtaining of property by false pretenses in 1811. In more recent years, the legislature has focused on a set of victims who are especially vulnerable to financial fraud: older adults. Financial exploitation of such a person is its own kind of crime—a crime that may be subject to more severe punishment than other types of fraud and that encompasses a broader array of deceptive behavior. Assets obtained through such fraud may also be frozen or seized pending the resolution of the criminal case to ensure that the victim receives the restitution he or she is owed.
The crime. G.S. 14-112.2 criminalizes the financial exploitation of an older adult, who is defined as a person 65 years old or older. (The provisions of this statute also apply to financial exploitation of a disabled adult, who is defined as a person 18 years old or older or a lawfully emancipated minor who is present in North Carolina and who is physically or mentally incapacitated as defined in G.S. 108A-101(d). This post will, however, focus solely on the crime of exploiting an older adult.)
Position of trust or business relationship. G.S. 14-112.2(b) makes it a felony offense for a person who (a) stands in a position of trust and confidence with an older adult or (b) has a business relationship with an older adult to:
(1) Knowingly, by deception or intimidation;
(2) Obtain, use or attempt to obtain or use the funds, assets, or property of the older adult;
(3) With the intent to temporarily or permanently deprive the older adult of the use, benefit, or possession of the funds, assets, or property, or to benefit someone other than the older adult.
The class of felony depends on the value of funds, assets or property involved. If the value is $100,000 or more, the offense is a Class F felony. If the value is $20,000 or more but less than $100,000, the offense is a Class G felony. If the value is less than $20,000, the offense is a Class H felony. By way of comparison, obtaining property by false pretenses is a Class C felony if the value obtained is $100,000 or more and is a Class H felony in all other circumstances.
No special relationship. G.S. 14-112.2(c) criminalizes the same behavior as the previous subsection, but does not require that the defendant stand in a position of trust and confidence or have a business relationship with the older adult. This subsection also applies to a person who conspires with another to obtain or use an older adult’s funds, assets or property with the unlawful intent described above. It further provides that “[t]he crime does not apply to a person acting within the scope of that person’s lawful authority as the agent for the older or disabled adult.” The class of felony under this subsection likewise depends on the value of funds, assets or property involved. If the value is $100,000 or more, the offense is a Class G felony. If the value is $20,000 or more but less than $100,000, the offense is a Class H felony. If the value is less than $20,000, the offense is a Class I felony.
Crime of opportunity. The fact patterns in cases involving this crime are remarkably similar. An older adult with declining cognitive and physical abilities lives alone. The defendant, who is younger, begins to help the older adult with household tasks and spends increasing amounts of time with the older person. The older victim pays the defendant amounts that far exceed the value of his or her services. Sometimes the older adult even provides the defendant with a power of attorney. By the time a family member learns of the fraud, significant funds have been transferred to the defendant. See, e.g., State v. Norwood, No. COA 17-301, 808 S.E.2d 625 (January 2, 2018) (unpublished); State v. Martin, NO. COA13-956, 234 N.C. App. 329 (2014) (unpublished), reversed, 368 N.C. 31 (2015), State v. Forte, 206 N.C. App. 699 (2010).
In one Wilmington case, the 40-year-old defendant, who had been hired to provide in-home care for an 80-year-old man, married the victim and took over a month later as his power of attorney. Prosecutors alleged that she drained the victim’s bank account, cashed in his savings bonds, and mortgaged his home, which was later sold for half its previous value. The defendant pled guilty to financial exploitation under G.S. 14-112.2, and received a probationary sentence.
Barriers to prosecution. Proving that an older person has been defrauded can be challenging. The victim’s cognitive skills may be in a state of decline, which may prevent the victim from remembering how events transpired, particularly by the time the case comes to trial. See, e.g., Forte, 206 N.C. App. 699 (2010) (upholding defendant’s convictions for financial exploitation of an elder adult and finding no error in trial court’s determination that elderly victim was competent to testify despite his inability to respond coherently to all of the questions asked). Sometimes the person alleged to have defrauded the older adult is a family member, making it harder to prove ill intent. The alleged defrauder may also have obtained legal authorization from the victim in the form of a power of attorney granting him or her legal authority to engage in financial transactions for the victim. Though such authorization does not preclude the prosecution of the defendant, it can make it more difficult to prove that the funds were obtained by deception or intimidation. Finally, the victim may not always support the prosecution of the defendant.
Notwithstanding these barriers, more than 800 charges alleging the financial exploitation of an older adult were filed in 2016 and 2017.
Indictment language. Pursuant to recommendations from the Task Force on Fraud Against Older Adults, the General Assembly substantially amended G.S. 14-112.2 in S.L. 2013-337, broadening its scope and simplifying the definition of the victims it protects. Sample indictment language for such a charge is set forth in Jeff Welty’s 2013 Update to Arrest Warrant and Indictment Forms.
The court of appeals in State v. Norwood, No. COA 17-301, 808 S.E.2d 625 (January 2, 2018) (unpublished), held that an indictment under G.S. 14-112.2 is not required to state the specific nature of the deception in which the defendant engaged. In the course of its discussion, the court noted that that the “‘deception’” employed in such a case “might simply be that the defendant pretended a fondness and concern for the victim that he did not actually feel.” (Slip op. at 12).
Freezing or seizing assets. If a defendant is charged with a violation of G.S. 14-112.2 that involves funds, assets, or property valued at more than $5,000, the district attorney may petition the court for an order freezing the defendant’s assets in an amount up to 150 percent of the value involved in the criminal proceeding for purposes of restitution to the victim. See G.S. 14-112.2(f). To obtain such an order, the prosecutor must establish by clear and convincing evidence that the defendant is about to or intends to divest himself or herself of assets in a manner that would render the defendant insolvent for purposes of restitution. See G.S. 14-112.3(b). Following the issuance of such an order, the defendant or any person claiming an interest in the assets may file a motion to release the assets. G.S. 14-112.3(c). In any proceeding to release assets, the State must show by clear and convincing evidence that the defendant is about to, intends to, or did divest himself or herself of assets in a manner that would render the defendant insolvent for purposes of restitution. If the court so finds, it must deny the motion.
Not just a criminal matter. Suspected financial fraud against an older person may, if the person is also disabled, launch an evaluation by the county Department of Social Services. My colleague Aimee Wall wrote here about the legal framework for addressing the financial exploitation of older adults and disabled adults, including the role of DSS. Financial fraud against an older person also may also trigger the initiation of a proceeding under G.S. Chapter 35A to adjudicate the adult incompetent and declare a guardian. My colleague, Meredith Smith, wrote about that here and here.