Beware: the guest speaker in your pulpit might be a con artist.
That’s a warning that the victim in this week’s case might have appreciated. Instead, he was swindled out of $472,000.
His story was the subject of an opinion decided by our State Supreme Court this month and is entitled, Estate of Harvey Severson v. Paul Wentzlaff, North American, and Allianz (2012 S.D. 50).
“Elder abuse” is a phrase I usually associate with wretched nursing home conditions. But the phrase has a much broader reach. It also refers to financial crimes against senior citizens. This financial abuse is the most common harm facing seniors but the also the most difficult to detect.
Chief Justice Gilbertson has commented that it is one of the biggest unsolved problems facing our state. He attributes it to our changing society:
“Gone are the days when the neighborhood remained stable, and each household looked out for its neighbor. Adult children of seniors often remained close by and even in the same household. Today, with increased mobility, divorce, declined birth rates, increased life span, and other factors, this stability begins to disappear.”
As our parents and grandparents approach their golden years, we must be even more vigilant for their interests. We can’t be too trusting of anyone.
Paul Wentzlaff found a way to earn that kind of trust. He appeared in the pulpit one Sunday while working as a financial advisor and made a friendly announcement about the importance of financial planning, and also offered his services.
As part of Mr. Wentzlaff’s marketing, he told people he was a member of the Fellowship of Christian Estate Planners, Inc. However his methods were anything but Christian, and I’m sure that group disowns him.
After his pulpit pitch, Mr. Wentzlaff soon found himself with a new client named Harvey Severson. Harvey was a retired farmer and had just moved into an assisted living facility.
Harvey needed investment advice as well as help writing checks and tending to his finances. For $250 a month, Mr. Wentzlaff provided Harvey with bookkeeping sevices.
He also began converting Harvey’s investments from mutual funds to annuities. Then, Mr. Wentzlaff began submitting withdrawal requests to take money out of those funds.
Harvey knew about each withdrawal because he signed the forms, but Mr. Wentzlaff told him that the funds were needed to pay bills or for other investments.
Instead, Mr. Wentzlaff used most of the funds for personal and business expenses.
Meanwhile, Mr. Wentzlaff had been doing the same thing to another client named Orlin Berge.
However, Orlin had an attorney who reviewed his records and became suspicious of what was going on.
To try and fix things, Mr. Wentzlaff cashed out one of Harvey’s annuities to pay back the money he had embezzled from Orlin.
Eventually the law caught up with Mr. Wentzlaff. He pled guilty to grand theft and was sentenced to 20 years in prison. In addition, the judge ordered Mr. Wentzlaff to make restitution to his victims of $472,000.
Less than a year later, Harvey died with an estate worth substantially less than it should have been. Unfortunately for his family, Mr. Wentzlaff did not have the funds to pay the restitution bill, and he was not going to be earning much from prison.
In order to recover the missing money, Harvey’s estate brought a lawsuit against the insurance companies that Mr. Wentzlaff had sold annuities for: North American and Allianz.
The estate used the legal theory called “respondeat superior.” That’s Latin and means “let the master respond.” It’s also called the master-servant rule. The idea behind it is that if an employee does something wrong, his employer must also share the blame because it was in a position to prevent the harm.
In fact, much of the law functions this way: creating financial liability for (almost) anyone who could have done something to stop an accident or an intentional act.
As a defense to the theory of respondeat superior, the insurance companies argued that Mr. Wentzlaff’s conduct was motivated only by his own interests, and didn’t further his employers’ interests. The Court rejected this defense because the insurance companies benefitted when the policies were cashed out (through surrender charges and interest adjustments).
As a second defense, the insurance companies argued that Mr. Wentzlaff’s conduct was unforeseeable. In other words, under the law, it was not an expected risk or cost of doing business.
The Court agreed with this defense. Mr. Wentzlaff’s conduct was “seriously criminal” and the companies were unaware that he was providing bookkeeping services to clients. Because the Court agreed this conduct was entirely unexpected, the claims against the insurance companies were dismissed.
This week, make it a point to check up on the finances of your oldest loved ones and make sure you feel comfortable with their financial advisor.
