Thefts from nursing home trust funds target the elderly

• Thefts from trust funds exceeded %24100%2C000 in several cases
• The crimes are extremely difficult to detect
• Audits and other safeguards fall far short of what%27s needed%2C experts say

The administrator at the Vicksburg Convalescent Center knew something was wrong when she saw the receipt: a $90 debit from a resident's trust fund account for a pair of designer jeans.

Of all the elderly residents at the 100-bed nursing home, Amy Brown figured, this one was especially unlikely to spend his savings on pricey pants.

Both of his legs had been amputated.

Brown pored over the trust fund books. There were receipts to back up every charge, so audits had found nothing amiss. But she spotted "receipts for things I knew the residents wouldn't buy" — North Face jackets and Ugg boots, hair dryers and makeup, even a baseball bat. "I felt sick," Brown recalls.

Suspicions fell on Lee Martin, an office staffer at the Mississippi facility and an affiliated nursing home across town. Martin was charged in 2012 with billing $101,000 in personal expenses to the trust accounts of 83 residents at the two facilities. She pleaded guilty in August to multiple counts of exploitation of vulnerable adults.

"These (residents) are vulnerable; the nursing home is supposed to take care of them," says Phyllis Foster, 67, whose 89-year-old mother-in-law had funds embezzled by Martin. "I was surprised there wasn't more oversight."

Thousands of residents in U.S. nursing homes and other long-term care institutions for the aged and disabled have had their personal savings raided or mismanaged after relying on the facilities to safeguard the money in special trust fund accounts, a USA TODAY investigation shows.

These trust funds, which most long-term care providers are required to maintain for residents who request that the facility handle their money, are supposed to work like conventional bank accounts, with accrued interest, regular statements and reliable oversight. But USA TODAY found more than 1,500 recent cases in which nursing homes have been cited by state and federal regulators for mishandling the funds.

In scores of cases, employees or administrators siphoned huge sums of money from trust accounts — hundreds of thousands of dollars in some instances — for everything from shopping and gambling sprees to routine household expenses. In hundreds more cases, facilities failed to pay interest on the funds, could not account for their holdings, or did not carry adequate insurance to protect the money from loss or theft.

The investigation spotlights a growing problem that has caught the attention of state attorneys general, several of whom have beefed up units that investigate financial exploitation in long-term care. Yet the problems continue, and there could be far more thieves who never get caught.

Trust fund cases "can be hard to detect," says Lori Smetanka, head of the National Long-Term Care Ombudsman Resource Center. "It can take a long time before anyone figures out that someone is stealing the money ... I think a lot of cases don't even get picked up."

When a case does come to light, the victimized residents usually get reimbursed because nursing homes are supposed to keep the trust funds insured. But the worry, confusion and emotional damage often linger on.

Officials at the Centers for Medicare and Medicaid Services, the federal agency that regulates almost all of the nation's nearly 16,000 nursing homes, were unavailable to comment due to the federal government shutdown. But many state officials acknowledge that trust fund thefts and mismanagement are a growing problem that gets insufficient attention from both nursing home operators and the agencies that oversee them.

"I do think there's an oversight issue ... There aren't a lot of safeguards in the system," says Ken Moore, a senior assistant attorney general in South Carolina's Medicaid Fraud Control Unit, which has prosecuted at least a dozen trust fund theft cases in recent years.

"A lot of these cases involve an office manager or a business or finance manager, and they're the only ones at the facility who really know how much money is coming in and going out of these accounts, Moore adds. "So these cases can be very difficult to detect — a lot of these people get caught just by happenstance."

In 2010, Moore's office convicted a nursing home business manager who was caught forging checks from the trust fund after she dropped one of the checks in the parking lot. A co-worker found it, triggering an investigation into the theft of $50,000 in residents' funds. Says Moore: "If she hadn't dropped that envelope, I'm not sure she ever would have been caught."

WHAT WE FOUND

USA TODAY reviewed thousands of pages of nursing home inspection records, court files and prosecution reports to identify cases of resident trust funds being mismanaged or stolen. The newspaper also studied government reports and interviewed dozens of experts to assess the scope and impact of the problem. Among the findings:

• Since 2010, state and federal inspectors issued more than 1,500 citations to nursing homes for mismanaging trust funds or failing to protect them from theft, according to USA TODAY's analysis of data from the Centers for Medicare and Medicaid Services, the federal agency that regulates nursing homes. Most "deficiencies" involved failing to pay interest, inadequate accounting or not giving residents proper access to their money.

• Among more than 100 prosecutions of employees who stole money from trust funds at long-term care institutions, the newspaper found, more than 30% involved thefts of tens of thousands of dollars or more. Most of the thefts involved funds for multiple residents so thousands of elderly residents and their families were affected. At least 10 thefts exceeded $100,000.

• Lax oversight often allows trust fund thieves to operate for months, even years, without detection. While federal regulations require all nursing homes that participate in Medicare and Medicaid to maintain trust fund accounts, the rules do not mandate any sort of regular, independent audits. Some states have imposed such mandates on their own, but many have not.

• State and federal inspections at nursing homes and other long-term care facilities typically focus on resident health and safety, devoting relatively little attention to the management or security of resident trust funds. USA TODAY surveyed 36 state and local ombudsmen and 32 of them — nearly 90% — said tighter oversight is needed, either through new regulations or better enforcement of existing rules.

"These crimes are clearly crimes of opportunity," the office of Texas Attorney General Greg Abbott said in written responses to questions. "The last thing (nursing home residents) should have to worry about is getting ripped off by the very people they've entrusted with their care."

Nursing home operators note that thefts and mismanagement of trust fund money hurt everyone, including the facilities. When residents' funds are raided, the nursing home is left to repair the damage, make up for any shortage of funds not covered by insurance, and go after the culprit for restitution.

"It doesn't happen very often and when it does, it's tragic," says Greg Crist, senior vice president of the American Health Care Association, the main industry trade group. "There are restrictions on how we collect, hold and disperse these funds. It's very regimented. But even in light of that, there are people who are able to game the system."

ANATOMY OF A SCAM

Lee Martin knew exactly how to cover her tracks.

Like many nursing homes, Vicksburg Convalescent keeps trust funds in a single account. A resident's money is deposited there — everything from Social Security and pension checks to money sent by guardians and relatives — and the resident can tap the account to pay for care and incidentals.

And like many nursing homes, a single person — Martin — managed all aspects of the trust account. When residents or their guardians needed to pay for something, Martin issued checks and recorded the receipts. When residents had bills from the nursing home, Martin transferred the funds. When the books needed to be reconciled, Martin took care of that, too.

"Her main job was just to handle the resident trust accounts; she knew how everything worked," says Brown, administrator of the home, which has consistently gotten high ratings for resident care. "She'd been here a long time, the ideal employee. I trusted her totally."

Martin began billing personal purchases to the trust funds in 2010, disguising her receipts as resident expenses and taking reimbursement checks, court records show. She also skimmed money that was to be drawn from residents' funds to pay for their care at the nursing home.

Efforts to reach Martin for comment were unsuccessful, including a request made with her lawyer.

Investigators found that Martin's thefts went on for nearly a year, victimizing residents at both Vicksburg Convalescent and its sister facility, Shady Lawn Health and Rehabilitation, where she also managed trust funds. She issued herself dozens of checks, ranging from just over $100 to upward of $3,000.

Martin targeted residents who paid for their own care or used Medicare. (Residents on Medicaid, the public insurance program for the poor and disabled, carry smaller trust funds.) And she chose residents who "didn't have family (monitoring their finances) or who maybe had a little dementia," Brown says. "She did a really good job of hiding what she was doing."

THE OVERSIGHT GAP

Nursing homes often get cited by regulators for mishandling resident trust funds, but it generally isn't the type of oversight that's likely to catch someone stealing.

Annual nursing home "surveys" are governed by federal standards, but the inspections themselves usually are done by state health departments under authority delegated by the Centers for Medicare and Medicaid Services. Reviews of other long-term care facilities, such as those housing people with developmental disabilities, also are generally a state responsibility.

"A lot of the time, these are nurses doing the surveys, so they're geared towards making health assessments. ... There's a lot of ignorance about these (trust) funds," says Patricia McGinnis, executive director of California Advocates for Nursing Home Reform. "They check a box that says there's a trust fund, they look at some documentation. They're not trained in forensic accounting."

Indeed, when it comes to assessing a facility's management of resident funds, many surveyors rely mainly on what they hear from residents — and the nursing homes themselves.

The federal guidance for surveyors dictates that they check with the nursing home management and interview a sampling of residents to confirm that trust accounts are provided and that residents who use them receive interest and regular statements. They verify that facilities have surety bonds to protect their trust accounts and make sure that the accounts of the deceased have been closed properly.

Overseeing the funds and satisfying all the rules "can be a challenge" for many nursing home administrators, says the industry association's Crist.

"Their background and their training is in health care management and health care delivery, not so much in accounting and bookkeeping," Crist says. "They have to place a certain amount of trust in everyone who has their own job to do, right down to the custodian. And that includes (business) office staff."

Catching a determined thief — someone with the skills needed to hide their crimes — often comes down more to luck than due diligence.

Judy Putman's thefts from the resident trust account at the Renfro Health Care Center in Waxahachie, Texas, were discovered after the local bank caught her cashing a check on the account with an endorsement signature that didn't match bank records. After an investigation, she was charged with forging 145 checks, taking more than $350,000 from the funds of 110 residents. She pleaded guilty in 2007 to misapplication of fiduciary property.

THE SCHEME UNRAVELS

Lee Martin got careless.

By the time she was caught, she was skimming increasingly large sums from the resident trust account. She had escaped detection during a partial audit by state surveyors. But the nursing home's operators had noticed that residents who should have had plenty of money were falling behind in paying bills for their care.

"We'd switched to a new computer (accounting) system, so when we saw that some of these accounts had fallen behind, we were trying to drill down, trying to figure out if we were using the system correctly," recalls Brown, the administrator. "But we never suspected what was happening."

One day, Brown went into the business office and noticed a check that Martin had left on the printer — a petty cash check drawn on the trust fund of a resident who had lost both his legs and didn't get out much for shopping. Brown checked the receipt.

"It was for a $90 pair of designer jeans from a store called Buckles, and I thought, 'Why would he want that?' So I started going through books … (and realized) 'Oh my gosh, she wouldn't buy this, he wouldn't buy that.' And it just hit me. I immediately put a hold on everything and called the authorities."

Teresa Mathews, an auditor who worked on the case for the Mississippi attorney general's office, served previously at the state Medicaid agency that does nursing home surveys. At Martin's pre-sentencing hearing, the judge asked for Mathews' view on trust fund thefts:

Q: Is this prevalent around the state, how this scheme works? … It seems like it's an easy scheme for someone (who) has that much trust.

A: Yes, sir.

Q: Isn't there some oversights that should be in place … mandated by the state?

A: Well … each nursing home, it is their responsibility to enforce internal controls and oversights. But, yes, there should be some (more) oversights.

AN ABSENCE OF SCRUTINY

Mississippi's oversight of resident trust funds actually is tougher than the norm.

Federal rules do not require nursing homes to audit their resident trust fund accounts. Some states — including Mississippi — do partial or occasional audits during the regular inspection process, and some nursing home operators conduct audits as a matter of company policy. But at many nursing homes, resident trust funds are not subject to any independent accounting.

"Most businesses have regular audits. That should just be part of a nursing home's regular operating costs," says Robyn Grant, head of public policy and advocacy at the National Consumer Voice for Quality Long-Term Care, a residents' advocacy group. Grant says the failure to require audits even when surveys pick up other problems with trust funds is especially troubling, given those errors could be signs of trouble.

In general, the people handling resident trust funds often are among nursing homes' least scrutinized staff. While hands-on caregivers — nurses and nursing aides or assistants — typically must be licensed or certified by the state and able to pass a criminal background check, office staff often are not subject to such requirements.

"I do think there's often a failure to properly oversee the business offices in these facilities," says Moore, the assistant attorney general in South Carolina.

Crist says his organization has put increased emphasis on training nursing home administrators to watch over their business operations. The association also has partnered with the Consumer Financial Protection Bureau to build new safeguards against financial exploitation of nursing home residents.

"The key is awareness," Crist says, noting that this applies not only to nursing home administrators and staff, but also to families and guardians of residents. Residents "should be getting regular statements (for trust accounts), and the more that family members can watch these funds and be aware of what's happening with their loved ones, the better."

AFTERMATH: SHATTERED TRUST

Staff and residents at Vicksburg Convalescent had their awareness raised the hard way.

At Lee Martin's pre-sentencing hearing, the courtroom was filled with more than 50 people affected by her crimes — nursing home residents, family members and facility staff.

Lillian Ann Warfield took the stand to talk about the impact on her elderly aunt, who remained upset long after learning that her money was taken. "When I come and visit her, she just cries," Warfield testified. "She wants to know what is happening to her money."

Others in the audience carried photos of loved ones who were among Martin's victims.

Yet some of the most lasting damage may be on the nursing home staff itself.

"The whole thing was devastating; it took a toll on everyone," Brown says. "We have a really good building, a really strong, close staff, and we all work hard to do the best job we can, so this was just a slap in the face to everyone."

To this day, Brown hasn't been able to bring herself to hire another trust account manager; she's taken on that role herself.

"I have to see every (account) detail," she says. "There are so many major things you deal with at a nursing home, so many things need attention, and this (trust account) just seemed more minor. But it isn't. Administrators have to realize that you're responsible for that trust account. You really have to oversee it."

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Contributing: Michael Auslen, Morgan Fecto, John Kelly