November 28, 2012 (202) 224-7433


For Decades, the VA Fiduciary Program – Where Feds Appoint Family, Friends & Often Strangers to Handle Disabled & Elderly Vets’ Finances – Has Been Plagued With Theft, Fraud & Delays

Schumer Calls on the VA to End Needless Foot Dragging and Submit Draft Rules to OMB That Have Been Delayed For Months – Rules Would Increase VA Staffing Levels & Improve Training to Catch Fraud, Require Background Checks of Fiduciaries & Expedite Delivery of Benefits

Schumer: Vets Have Survived Battle, Shouldn’t Have To Fight Scoundrels

Today, U.S. Senator Charles E. Schumer launched his push to safeguard thousands of elderly and disabled Upstate New York veterans from widespread fraud and deficiencies in the Department of Veterans Affairs (VA) fiduciary program. Specifically, Schumer demanded that the VA swiftly submit new regulations to the Office of Management and Budget (OMB) that were expected for submission as far back as June. These rules are intended to help protect veterans in the fiduciary program from fraudulent and irresponsible managers who are appointed by the VA to oversee their finances and VA benefits. The VA has been known to assign strangers to these positions, and even documented criminals and gamblers, and the program has caused millions of dollars of lost benefits to our nations heroes.

The VA itself has admitted that the fiduciary program is outdated, and on numerous occasions VA officials have claimed that these new draft regulations are complete. However, those rules still sit at the VA, and Schumer urged that they be swiftly sent to OMB for approval and implemented immediately thereafter. Schumer said that these improvements must address flaws in the fiduciary appointment process; better explain VA beneficiary rights to recipients and their families; impose stricter qualifications for fiduciaries, proven through the increased use of background checks; and better oversee that fiduciaries are following responsibilities and reporting requirements once assigned to a veteran. Schumer called on the VA to better identify and report non-compliance and to increase staffing and training to improve the oversight of the fiduciary program. Schumer’s push comes after a recent Hearst Newspaper investigation and repeated VA Office of Inspector General reports have shown a widespread trend of fiduciary fraud that has caused veterans across the country millions of dollars in hard-earned income and veterans benefits.

“For too long, veterans have fought for our nation and survived battle, only to face friendly fire from their VA-appointed fiduciaries,” said Schumer. “The VA fiduciary system, in which a third party is appointed to manage and protect the finances of elderly or mentally disabled veterans, lacks sufficient oversight, and is full of bad actors, needless delays, fraud and theft. To put it simply- enough is enough.”

“What’s more, the Department of Veterans Affairs has developed new rules to overhaul and update the current fiduciary program, but after months and months, is yet to submit them to the Office of Management and Budget for approval, even after claims that those rules have been completed for months. When it comes to eliminating delays in delivery of VA benefits, and protecting thousands of vulnerable New York veterans from crooks, gamblers and perfect strangers, there can be no roadblocks in the process, and I am urging their expeditious submission of these regulations. With more and more veterans returning home from Iraq and Afghanistan, there will only be more individuals in need of reliable financial protection, and the VA and then the OMB must finalize these new regulations and begin enactment immediately.”

During the call, Schumer revealed a county-by-county report of elderly and mentally disabled veterans who have already been assigned fiduciaries and those who are eligible and awaiting the appointment of a fiduciary. In New York, there are 2,473 veterans that fall into the first category, and at least 507 additional veterans that await the appointment of a fiduciary. This number will only continue to increase as veterans return home from the wars in Iraq and Afghanistan in the coming years, potentially with mental illness, and Schumer argued that the system failures that lead to fraud, delays and theft should be addressed as soon as possible. While not all fiduciaries are bad actors in this system, numerous media reports as well as Office of Inspector General investigations in 2006 and 2010 have uncovered pervasive deficiencies in the fiduciary program, and the VA has done woefully little to permanently resolve these problems. On June 20,2012, in a House Veterans Affairs Subcommittee on Oversight and investigations, a VA official stated that “[the] VA also completed its proposed fiduciary regulations”. However, the VA has still not submitted those regulations to the OMB almost six months later, and Schumer urged that they stick to their word and swiftly prioritize and finalize the regulations. Schumer highlighted that the draft rules under consideration at OMB would next need to go out for public comment and be revised by the VA before being made final.

Schumer explained that a fiduciary is a person or entity appointed to receive and manage monies paid under any of the laws administered by the Secretary of the Department of Veterans Affairs (VA) for the use and benefit of a minor, Veteran, or other beneficiary who has been determined to be unable to manage their financial affairs. The VA’s Fiduciary Program is intended to oversee financial management of VA benefit payments to beneficiaries who are incapable of managing their funds. The VA alone can choose family, friends, other individuals and organizations to manage these funds on behalf of our nation’s veterans.

Schumer highlighted that the role and proper oversight of a fiduciary is absolutely critical in protecting the thousands of veterans in New York that are currently part of the program, as well as the thousands of others who are facing delays in being assigned this third-party representative. Any individual appointed as a VA fiduciary is responsible for managing the beneficiary’s VA income and ensuring the beneficiary’s debts are paid. Additionally, responsibilities of the fiduciary include, but are not limited to, utilizing the funds for the veteran’s daily needs, like food, clothing, housing, medical expenses, and personal items of the veteran, and his dependent family members. The fiduciary can never borrow, loan, or gift funds belonging to the beneficiary, and must never withdraw cash from a beneficiary’s account by check or ATM. The fiduciary also has a wide variety of reporting requirements that it technically must follow, like keeping accurate and complete records and receipts, and reporting any problems with VA payments on behalf of the veteran. Schumer highlighted that while these safeguards are important and reasonable, the VA’s oversight of them is poor. Due to insufficient staffing in the fiduciary program, and lack of appropriate training for VA staffers to detect fraud, a great deal of the VA’s rules go unenforced. For example, in many cases of theft, simple oversight of bank records could have caught the illegal movement of a veteran had the VA been staffed to do so. In one instance cited by Hearst Newspapers, a VA field examiner that was in debt partnered up with a fiduciary, and together they used their authority and power to steal nearly $900,000 from several mentally disabled veterans over the course of ten years. In addition, audits often show that that on-site inspections of fiduciary-veteran relationships are limited, often delayed or even skipped, and VA officials in the field are not trained to handle difficult cases and signs of fraud and theft.

Schumer’s casework office has also seen over 100 cases in which VA beneficiaries experience significant red tape in the assignment of the VA fiduciary. For example, in an effort to manage an elderly parent’s affairs, sons and daughters have reported running into serious frustrations and road blocks in being assigned as a fiduciary. Until a VA Fiduciary is assigned, the beneficiary is technically expected to apply for benefits on their own. Also, Schumer highlighted a considerable concern amongst veterans and their families, that the VA does not automatically recognize individuals with Power of Attorney (POA) as fiduciaries. Under the current law, the VA can assign anyone to manage an eligible veteran, regardless of who the POA or eligible family members might be. Schumer highlighted that these issues related to assignment of a fiduciary should be addressed in the VA’s new regulations.

Schumer added that the VA should include consistently implement background and credit checks when assigning a fiduciary, regardless of whether they are a family member or stranger. A variety of media reports note incidences of fiduciaries having criminal backgrounds and histories of gambling, which should be obvious red flags. For example, the Hearst report highlighted a case in which a federal employee, who was also a gambling addict, was a fiduciary for 16 veterans’ and stole $62,000 from three veterans.

The VA fiduciary system includes 95,000 paid and unpaid fiduciaries who manage the finances of 121,000 beneficiaries. Last year, VA-awarded fiduciaries oversaw $171 million in veterans benefits. Since 1998, it is estimated that at least $14.7 million worth of veterans benefits have been stolen as a result of bad actors in the fiduciary program. Instances of fiduciary theft have been reported across the country. New York has not been spared. In Syracuse, a woman stole tens of thousands of dollars from two elderly and disabled veterans, and another case in Buffalo in which a daughter stole thousands of dollars from her father. In these cases, there were signs of fraud, including falsified annual accountings and years of missing finance reports. Schumer also highlighted thanks to the VA’s poor oversight, the total number of veterans impacted is largely unknown.

Schumer highlighted the breakdown of veterans assigned a fiduciary in New York:

o In the Capital Region: 249 veterans are assigned a fiduciary, and 23 still await their appointment.

o In Central New York: 190 veterans are assigned a fiduciary, and 81 still await their appointment.

o In Western New York: 423 veterans are assigned a fiduciary, and 95 still await their appointment.

o In the Rochester Finger Lakes Region: 343 veterans are assigned a fiduciary, and 67 still await their appointment.

o In the Southern Tier: 116 veterans are assigned a fiduciary, and 28 still await their appointment.

o In the North Country: 75 veterans are assigned a fiduciary, and 12 still await their appointment.

o In the Hudson Valley: 307 veterans are assigned a fiduciary, and 49 still await their appointment.

A copy of Senator Schumer’s letter appears below:

Dear Secretary Shinseki and Director Lew:

I write to express my concern over the status of reforms to the Fiduciary program within the Department of Veterans Affairs (VA). While numerous media reports as well as Office of Inspector General investigations have uncovered pervasive deficiencies in the fiduciary program, woefully little has been done to permanently resolve these problems. While the VA has worked on a draft proposed rule-making to reform existing fiduciary policy I understand that it has yet to be discharged to the Office of Management and Budget (OMB). I would urge VA and OMB to discharge this rulemaking and the VA to expeditiously finalize strong fiduciary regulations.

It is imperative that final fiduciary regulation include robust reforms to protect the most vulnerable members of our veteran community. The reforms should including a requirement for all fiduciaries to undergo a criminal background check and credit check.

The VA currently has contracts in place to conduct criminal back ground checks so it is imperative that they as well as credit checks are included in a VA final rule to ensure those managing the finance of veterans are most appropriate. It is also imperative that final regulations include swift and direct reporting of any fiduciary impropriety to the Office of Inspector General for review and if necessary criminal investigation. There have been too many cases of fiduciary’s misusing and stealing funds necessary for the care of indigent veterans, which is not just reprehensible but criminal.

As you are both well aware fiduciaries are not merely bill payers. In order to most appropriately provide for the financial needs of these veterans Fiduciaries should have an understanding of the needs of those veterans they are working on behalf of. It is for that reason that the VA has a stated interest in prioritizing family members and the fiduciary services are overwhelming performed on a voluntary basis. The work of a fiduciary is important often thankless, which is being dishonored by those bad actors. It is imperative that regulations are finalized to prevent those bad actors from flourishing in the VA fiduciary system and the intent VA strives to realize is made a more frequent practice through these regulations. I would urge VA and OMB to discharge this rulemaking and the VA to expeditiously finalize strong fiduciary regulations.

Thank you for your attention to this important issue. If you are in need of any additional information please feel free to contact my Washington, DC office.

Bazzo 11/29/12

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