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Felons hired by Social Security to handle accounts of elderly
By LANCE GAY Scripps Howard News Service May 02, 2000
WASHINGTON - The Social Security Administration admitted Tuesday that it allows convicted felons to handle the financial affairs of elderly and disabled persons who no longer are capable of handling their own money.
Stunned members of the Senate Aging Committee responded that it's no surprise that the agency has opened 1,352 criminal investigations since 1998 involving people who have bilked the elderly of their benefits and savings.
"This is unfair and dangerous,'' said Sen. Blanche Lincoln, D-Ark.
If you aren't able to handle your own financial affairs and have no friend or relative to take on the task, the Social Security Administration will assign someone to do the paperwork for you.
Lincoln noted that most of the 10 million people recognized by Social Security as representative payees are "trusting and caring persons."
About 84 percent of them are relatives of people on Social Security. If a company or foundation handles an elderly person's affairs, the company is allowed to take $28 a month in fees.
Regarding many recent cases, senators heard that unscrupulous agents left the elderly destitute by siphoning off their benefits for lavish vacations, girlfriends and sport vehicles.
"A number of representative payees are convicted felons. That sounds very provocative, I know, but in many communities they are the only ones available," said James Huse, the agency's inspector general. The SSA considered changing procedures to bar felons from handling accounts in 1997, but took no action.
Sen. Conrad Burns, R-Mont., a one-time cattle auctioneer in several Western states, said he couldn't have held auctions without getting a bond from an insurance agency, and was stunned the Social Security Administration doesn't require intermediaries to be bonded and licensed.
"Maybe the enemy is us," Burns said.
Betty Byrd, a 70-year-old widow from Berkeley County, W.Va., told the panel her trailer home was sold from under her because the Martinsburg, W.Va., Aurora Foundation that the SSA appointed to take care of her affairs in 1996 failed to pay the ground rent and utilities when she was hospitalized.
Last year, she said, she was threatened with eviction from an assisted-living home because the foundation, which handled money for 140 disabled people, was several months late in paying monthly fees.
"I was left almost homeless and without medical care, and in serious financial trouble,'' she said.
Huse said that Gregory Gamble, a former Martinsburg banker who was director of the Aurora Foundation, was found to have embezzled $300,000 over four years _ most of it in Social Security benefits _ to support his mistress.
Gamble has pleaded guilty to embezzlement and is scheduled to be sentenced June 5, Huse said, and an investigation found he was never audited.
Theresa King of Tacoma, Wash., testified the SSA recognized her as a representative payee for more than 100 Social Security beneficiaries although she had a felony record.
King said she was not asked about her criminal background when she was named a representative payee. She is serving 30 months in prison for defrauding Social Security beneficiaries of $31,000. Many of the people she cheated have mental disabilities.
King's former employer, Dale Parsons, 64, who ran Ace Protective Payee Services in Tacoma, also pleaded guilty last year to stealing $112,800. King said Parsons spent the money on girlfriends.
She said fraud "is more widespread than is commonly known. There are people living on the streets while people are taking their Social Security checks, and bar owners who are keeping the checks to pay for bar tabs.''
Huse also cited the case of Angelique Hooks, the 38-year-old owner of Ivy's Social Services in Denver and Phoenix, who was sentenced last year to 18 months after diverting $274,000 from 320 elderly to pay her credit card bills, buy a sports utility vehicle and art.
Huse said computer matching programs found that the SSA last year paid $17 million in benefits to 2,091 people who were dead.
Senate Aging Committee Chairman Charles Grassley, R-Iowa, said he wants to change the law to allow the SSA to sue to recover misappropriated funds, as well as requiring companies and foundations handling benefit checks for the elderly and disabled to be bonded. He called Social Security-related fraudulent practices "the most offensive financial abuses I've ever seen."
Susan Daniels, the SSA's deputy administrator, said that in the wake of the frauds, the agency is auditing large firms and foundations handling Social Security checks for the disabled and retirees.
Daniels said most representative payees are honest, but "that is no comfort to the beneficiary who lost benefits because of misuse."
-- - (email@example.com), May 03, 2000