tained necessary court orders for all bank- ing records (due to Ms. Smith’s refusal to turn them over), analyzed the thefts from the trusts, traced the assets, provided ev- idence in the indictment phase, and testi- fied at the sentencing hearing to support a near maximum prison sentence for Ms. Smith. (The maximum sentence would have been twenty-seven months; she received twenty-four).
Our client chose to assist the govern- ment in its criminal case and forego a civ- il case for breach of fiduciary duty against Ms. Smith because the government added the state charges regarding the trust thefts to the federal charges on the Social Secu- rity thefts and requested restitution for all of the funds taken as part of Ms. Smith’s sentence. Ms. Smith was judgment proof; she had spent the money on non-recover- able items such as leasing a luxury SUV. Fur- thermore, the SNTs did not require a surety bond by the trustee, so a civil suit would have been pointless.
Conversion of Assets from Estates In the past two years we have seen the following situations, illuminating some of the methods used by fiduciaries to take what does not belong to them.
A. Impersonating an Executor/Theft of Estate Assets
In one estate case still in progress, an in-
terested person (referred to herein as “M”) was named as executor in a decedent’s will. “M” expressly declined appointment as ex- ecutor and consented to the appointment of an independent administrator. Subse- quently “M” flew to Europe, taking with them a copy of the will naming “M” as ex- ecutor, along with the Order Admitting the Will, and presented these documents at a foreign bank where the deceased had a bank account, credit card, and safe deposit box. “M” proceeded to take items of value from the safe deposit box and drained the bank account, causing an overdraft of more than $70,000. “M” under oath and during questioning on a witness stand in a probate court, freely admitted impersonating the executor at a foreign bank and taking in ex- cess of $70,000 in estate assets.
B. Guardianship/Agency Conversion of
Assets We have seen a number of instances
where guardians have taken assets from the guardianship estate and converted them for their own benefit. They are summarized below; all are supported by court records. • Guardian purchases vehicle with ward’s money, titles/registers vehi- cle in their own name, then drives the vehicle for personal use and charges mileage to the ward’s estate, along with all costs for gas, maintenance,
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and repair.
• Guardian uses fiduciary position to quit-claim ward’s home to himself and one other person, then sells the home, splitting the proceeds with other per- son. No license to sell is obtained from the court through hearing pro- cess. The sale comes to light after the ward dies.
• Guardian moves into ward’s home, sends ward to live with another rela- tive 1,500 miles away on a one-way airline ticket, then proceeds to use ward’s assets to pay all costs of use of home by guardian and their family, without paying rent or utilities.
• Agent for principal who is housed in a long-term care facility arranges to have agent’s personal monthly cable TV and utility bills paid automatical- ly from principal’s checking account where the principal’s Social Securi- ty check is deposited. Agent fails to pay any of the long-term care costs, despite cashing out and apparent- ly spending a $10,000 CD owned by the principal. Adult Protective Servic- es and legal counsel become involved after principal incurs nearly $15,000 in unpaid long-term care costs. Agent is removed, refuses to provide an ac- counting to the principal.
Recommendations
We believe that Vermont lawyers, state and federal prosecutors, and the judicia- ry have a responsibility to fully address the prevalence of abuse of vulnerable adults by theft and exploitation in this state. Thefts from fiduciary arrangements could be re- duced, and damage from thefts repaired, by more effectively using existing admin- istrative and legal tools that are currently available and by amending Vermont laws and administrative and court procedures in an appropriate fashion. Members of the Vermont bar have a gen-
eral responsibility to act to protect their clients. It is noteworthy that the Vermont Rules of Professional Conduct specifical- ly enable an attorney representing a client with diminished capacity to seek assistance to protect a vulnerable client from exploita- tion. VRPC Rule 1.14(b) provides:
When the lawyer reasonably believes that the client has diminished capaci- ty, is at risk of substantial physical, fi- nancial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonable necessary protective action, including consulting with indi- viduals or entities that have the ability to take action to protect the client, and in appropriate cases, seeking the ap-
THE VERMONT BAR JOURNAL • SPRING 2012 19
Living Well on Other People’s Money
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