Elderly N.J. Patient’s Last Years A Tale Of Financial Fraud

April 17–INQUIRER STAFF WRITER

The letters and e-mails from Allie Leibowitz to her mother’s lawyer, <person>Robert G. Welch , were growing increasingly desperate.

Leibowitz had reached the end of her rope. Divorced, nearly penniless, and coping with ailments that included an earlier bout with breast cancer, Leibowitz depended on stipends from her mother.

But that lifeline began to fray after her mother turned to Welch for tax advice.

Welch quickly persuaded Leibowitz’s mother, Rose Kogen, then 91 and in a Cherry Hill nursing home, to grant him power of attorney. Then he placed all of her stocks and bonds, along with the proceeds from the sale of her house, in an irrevocable trust under his control — and out of reach of her children.

Rather than send money, Welch more than once urged Leibowitz to get a job.

“My various medical conditions warrant that I get extensive blood work at least every three months,” Leibowitz beseeched Welch. “I now owe the doctor approximately $700. He requires that this be paid in full, or he will no longer treat me.”

There was a reason Leibowitz was having trouble gaining access to her mother’s money. But it would take years of costly litigation before she learned why.

Like millions of elderly Americans, Kogen had fallen prey to financial fraud.

Within months, Welch, who in addition to dispensing tax and financial advice had been involved in at least two troubled building projects in Center City and Wilmington, sold off Kogen’s stocks and bonds.

He poured nearly $1 million into a medical-device company he manages from run-down offices on South Eighth Street in Center City.

He paid himself $109,000 and accountants $17,000 to compute Kogen’s tax liability.

Yet a $55,000 check to the IRS bounced, and he failed to pay a $107,000New York state tax bill, even as he invested in the Ansar Group Inc., the medical-device company, according to court records.

By the time Welch, who lives in a leafy, prosperous subdivision in Media, was removed as trustee of Kogen’s estate by Philadelphia Orphans’ Court Judge John W. Herron , only about $272,000 was left of Kogen’s $1,200,000.

“The record demonstrates unremitting self-dealing by Robert Welch ,” Herron wrote. ” Robert Welch , in the course of his testimony, revealed the elaborate shell game that he had attempted to pull on the beneficiaries of the Rose Kogen trust.”

For a short time, Leibowitz and her brother, Jonathan Kogen , a psychologist in Great Barrington, Mass., believed they were regaining control of their mother’s assets. On Nov. 19, 2009, after years of lawsuits, the Pennsylvania Supreme Court issued a one-paragraph order upholding Herron’s decision that Welch had diverted Rose Kogen’s money for his own purposes.

But the siblings’ hopes were soon dashed. After years of effort and tens of thousands of dollars in legal fees, they are still trying to get their money back. A law firm hired to collect on Herron’s judgment concluded last year that Welch’s assets didn’t come close to matching the assertions of Leibowitz, her brother, and others.

In effect, it said, get in line.

Easy prey

Stealing from the elderly is the perfect crime.

Thefts typically take place in the shadows. Millions of elderly people, national and regional studies suggest, are defrauded by lawyers and other trusted advisers or close relatives, who can argue plausibly that they are acting on the victims’ behalf.

In Pennsylvania, New Jersey, and Delaware, the cases number in the tens of thousands, and the problem is getting worse, according to social workers, public interest lawyers, prosecutors, and jurists who protect the elderly.

People older than 50 possess vast wealth, 70 percent of the net worth of individuals in the United States, according to insurance giant MetLife.

Where better to recoup money lost in the financial crisis of 2008 and 2009 than in bank and brokerage accounts of seniors who have accumulated assets over a lifetime?

“Desperate times result in desperate measures,” said David Zellis of the Bucks County District Attorney’s Office, which has prosecuted hundreds of such financial crimes. “So people who might not have thought at all about taking money from older relatives now don’t even think twice before they do.”

Alarmed at the prevalence of investment fraud against older Americans, securities regulators in Pennsylvania and 22 other states are instituting a training program for physicians and other caregivers to help identify signs of abuse, such as a patient’s being pressured to change a will or grant power of attorney.

In Pennsylvania, the program is projected to start at the University of Pennsylvania School of Medicine this year and likely will be expanded, said Christina Kotsalos of the Pennsylvania Securities Commission.

But nabbing perpetrators can be exceedingly difficult.

Police and prosecutors say the swindlers avoid prosecution because their victims often don’t have the mental capacity or emotional strength to protect themselves.

Among the frail elderly, victims typically are isolated. Many are involved in family disputes or alienated from children who might otherwise step in. Sorting through who did what to whom is time-consuming and laborious. Moreover, because perpetrators often are relatives, elderly victims can be reluctant to report the crime.

David Jaskowiak , a Montgomery County lawyer who represents elderly victims seeking the return of their money or even their homes, said his caseload was growing 20 percent a year.

Financial advisers and lawyers are often the culprit because they are in a position of trust and have access to bank and brokerage accounts. But more often than not, Jaskowiak said, a relative is the one making off with the money.

“It is what I call the early-inheritance case,” he said, “where the children want the assets in advance — the son or daughter will come in and suck up all the assets. The problem is the elderly person may need those assets to pay for a wheelchair or medication, but in a number of cases the son or daughter refuses to give the money back.”

The most ambitious study of financial exploitation of the elderly was completed in 2008 by researchers at the University of Chicago, who surveyed more than 3,000 people ages 57 to 85 and reported that 3.5 percent said their money was improperly taken in the preceding year.

Linda Waite , a University of Chicago sociologist who helped design and lead the $15 million project for the National Institutes of Health, said the actual percentage was likely higher because people with obvious mental decline, a group at a high risk, had been screened out.

Similar findings emerged in a 2010 Justice Department study conducted by Ron Acierno , a professor in the department of psychiatry and behavioral sciences at the Medical University of South Carolina. In a random telephone poll of 6,000 people older than 60, he reported, one in 20 cited financial mistreatment by a relative in the preceding year.

Nationally, the Acierno study would translate into more than two million older Americans who have suffered some form of financial mistreatment or exploitation in the preceding year at the hands of relatives — more than 97,000 in Pennsylvania, 59,000 in New Jersey, and 6,000 in Delaware.

In Philadelphia, the number would be more than 9,000.

The Philadelphia Corporation for Aging, the main city agency providing assistance to seniors, said complaints of financial abuse had grown 42 percent from 10 years ago, to more than 500 a year.

Similarly, the New Jersey Office of the Ombudsman for the Institutionalized Elderly said that in 2008, the last year for which statistics were available, reports of financial fraud from nursing-home residents had jumped 23 percent from the year before.

Alone and unstable

At 91, two years before she died, Rose Kogen fit the classic profile of an elderly victim of financial fraud.

She was alone, confined to a nursing home in Cherry Hill, and infrequently in touch with her adult children. Her mental state was unstable.

Tension over money had coursed through the family for years. Both children said their parents had clashed over money.

When pushed to write a will, Kogen resisted.

She occasionally threatened to leave her assets to the United Federation of Teachers, to which she had belonged as a public schoolteacher, out of spite, the children sometimes believed.

Kogen said her children’s only concern was self-interest. “They turned on me. All they want is my money,” she told Claire Jurkowski , a physician who examined her at Welch’s behest.

Kogen’s son said his mother for years had shown paranoid tendencies, which intensified toward the end of her life. Her behavior became erratic, even bizarre, he said.

In spring 1998, she disappeared from her home in Forest Hills, Queens, turning up a few weeks later in East Windsor, N.J., with her granddaughter Michele, Leibowitz’s daughter.

Kogen said she had decided to move in with Michele because they got along and Michele could best care for her.

But this arrangement soon unraveled.

Kogen injured a shoulder in a fall, underwent surgery, and was admitted to the ManorCare Health Services nursing home in Cherry Hill for rehabilitation.

There Kogen met Welch. The lawyer, who declined to be interviewed for this article and did not respond to written questions, testified in a lawsuit the family brought against him that a nursing-home director had contacted him to assist Kogen with financial planning.

Approached by a reporter in his office April 4, Welch said: “I can’t talk to you. I am trying to run a business right now, and the business isn’t doing very well.”

Within a few months, according to court records, Welch had persuaded Kogen to give him power of attorney. By early 1999, he had placed her assets in an irrevocable trust, naming himself as trustee.

The trust meant that Kogen’s money could not be taxed, but it also placed those assets beyond the reach of anyone except Welch.

Leibowitz and Jonathan Kogen said the arrangement initially had pleased them: Their mother’s assets were locked in a legal vault — with a seemingly responsible person standing guard.

Welch had an impressive resume, seemed trustworthy, and conveyed competence. He was a 1969 Dickinson College graduate with a Villanova University law degree and a master of laws degree in taxation and an MBA in international business from Temple University. He seemed to have deep experience as a financial planner.

Jonathan Kogen was relieved.

His mother “was in and out of psychotic states,” he said. “She was paranoid her whole life, but at that point she was really losing it. [Welch] said, ‘I convinced your mother . . . to put everything in a trust.’ No one else could convince her to do that, so I appreciated that. I liked him for the first couple of years. I said very directly, ‘I am sure you feel you deserve money out of this, and if you don’t get too greedy, I won’t say anything.’ “

What the Kogen children didn’t know was that some of Welch’s customers and business partners had alleged they had been defrauded. Moreover, city and state authorities filed liens against him to recover unpaid taxes.

Some of his former business partners are still trying to collect.

Karpus Investment Management, a financial advisory firm near Rochester, N.Y., has been trying to enforce a $445,000 judgment stemming from a disputed development of a 33-unit apartment building at 222-226 Race St.

Karpus alleged, in U.S. District Court in Buffalo, that in 1990 Welch defaulted on his obligation to repay its customers for investments in his project, understated building costs, overstated rental income, and remortgaged the property without informing investors. Welch settled, but Karpus said it had been unable to collect.

In a similar scenario, Welch was sued by a Philadelphia physician, Joseph Witkowski , and his wife, who accused him of siphoning off their investment in a renovation at 70-72 N. Second St.

When Welch failed to pay them, the couple learned the property had been transferred to another aggrieved lender, according to court papers. An arbitrator, finding that Welch had committed fraud and breached fiduciary duties, awarded the Witkowskis $150,000.

“Welch apparently manipulated many different corporations and investors he courted to obtain and manipulate funds,” said a panel of the U.S. Court of Appeals for the Third Circuit, which reviewed the case. “The fallout from the real estate market in the late 1980s led to the collapse of his scheme.”

As with his real estate dealings, problems soon emerged after Welch took over managing Rose Kogen’s affairs.

The checks Welch promised Leibowitz often arrived late or bounced.

For a time, Leibowitz said, she had to move into a 24-hour self-storage unit she rented after she sold her house outside Atlanta following a second divorce in 1999.

Just as troubling, some of the checks Welch did send were not drawn on Rose Kogen’s trust account but on the corporate account of the Ansar Group, the company run by Welch and partly owned by a Welch family trust.

The Kogen children worried Welch was using their mother’s money to underwrite his business activities.

Jonathan Kogen’s concerns intensified in 2002 when Welch said he had been making donations out of Rose Kogen’s trust to the American Diabetes Association.

“I said, ‘You are making contributions?’ ” Kogen said. ” ‘Don’t you want to preserve capital in the trust?’ “

When Herron, the Philadelphia judge, ordered Welch to turn over the trust’s financial records in 2005, what the Kogen children learned shocked them.

Not only had Welch paid himself $109,000 in administrative fees and bounced a $52,000 check to the IRS, but he also had invested $928,000 in Ansar.

The company, which markets a device for nervous-system monitoring, had been hemorrhaging money during the years Welch invested Rose Kogen’s money in it, $1.3 million, according to court records.

Between 1999 and 2001, Welch funneled $928,000 from the Kogen trust into Ansar, which issued convertible debentures in return.

The debentures, essentially loans that were to pay 6 percent interest, gave the Kogen trust the option of converting the loans into stock, which Welch exercised for a portion of the investment.

The advantages to Ansar — and Welch — were huge. By converting some of the loans into an ownership interest, Ansar no longer had to pay interest, nor principal. The stocks had no discernible worth, Herron said.

Under investigation by state bar authorities, Welch gave up his law license in 2008, admitting he had used the Kogen money for his benefit and had engaged in misconduct and violated conflict-of-interest rules.

Meantime, a new court-appointed overseer for the trust, 1N Bank of West Chester, has been trying to determine if he has any assets, in an effort to regain money.

On April 20, Leibowitz got the bad news from a bank employee, Keli High, assigned to oversee the account.

“Hi, Allie,” High’s e-mail began breezily. “My apologies for the delayed response. I did speak with [the law firm hired to recover assets], and their response was that they’re not sure there’s much more that can be done. It seems that [Welch] has many other judgments against him, and no one has been able to get anything from him because he has no assets. I will inform you if anything changes.”

Where to Turn for Help

Dozens of social service and law enforcement agencies in the region focus on financial crimes or exploitation involving the elderly.

Each of Philadelphia’s suburban counties has an office on aging that can respond to allegations of exploitation, theft, and other forms of abuse, in many instances by referring the matter to the district attorney.

The Pennsylvania Department of Aging runs a 24-hour hotline where instances of abuse and neglect can be reported: 1-800-490-8505.

The Philadelphia Corporation for Aging investigates allegations of abuse in the city. Investigators at its protective-services unit can be reached 24 hours a day at 215-765-9040.

Here are other agencies or institutions that assist exploited or abused seniors:

Pennsylvania