Testimony of Dennis M. Lormel, Chief, Financial Crimes Section,
FBI
Before The United States Senate Special Committee on Aging
September 10, 2001
"Fraud Against the
Elderly"
Good morning Mr. Chairman and
Members of the Special Committee on Aging. I am pleased to
appear today on behalf of the Federal Bureau of Investigation
and share with your Committee the FBI's efforts to address
fraudulent schemes which promise everything from improved
memory, sexual vitality, curing of terminal illnesses, relief
from chronic pain and, the ultimate promise, a longer life.
These schemes target those who are most concerned about reversing
the effects of aging, the elderly.
Combining resources with other
federal and state investigative agencies has been a winning
formula for the FBI in this and many other types of investigations.
The joint investigative approach not only brings additional
resources in terms of manpower and investigative tools, but
also gives investigators access to expertise provided by regulatory
agencies such as the FDA as well as a larger selection of
applicable criminal and civil statutes from both the federal
and state levels.
Let me first emphasize that
the FBI has identified elder fraud and fraud against those
suffering from serious illness as two of the most insidious
of all white collar crimes being perpetrated by today's modern
and high tech con-man. The Internet, high speed dialers, mail
drops, and computers are just some of the tools available
to the fraudster to separate a victim from his money. Many
elderly citizens rely on pensions, social security and life
savings to support themselves. The seriously ill and their
families are desperate to find some glimmer of hope. The losses
inflicted by these unscrupulous con-men and their organizations
are both financially and emotionally devastating to these
victims.
It has been the experience of
the FBI that the elderly are preyed upon by these unscrupulous
individuals for several reasons:
1) Older American citizens
are most likely to have a "nest egg," own their
home and/or have excellent credit all of which the con-man
will try to tap into. Fraudsters are very familiar with
the old saying, "you can't get blood from a stone."
Like any other businessman, the fraudster will focus his
efforts on the segment of the population most likely to
be in a financial position to buy whatever he is selling.
2) Individuals who grew up
in the 30's, 40's and 50's were generally raised to be polite
and trusting. Two very important and positive personality
traits, except when it comes to dealing with a con-man.
The con-man will exploit these traits knowing that it is
difficult or impossible for these individuals to say "no"
or just hang up the phone.
3) Older Americans are less
likely to report a fraud because they either don't know
who to report it to or are too ashamed at having been scammed.
In some cases, an elderly victim may not report the crime
because he or she is concerned that relatives may come to
the conclusion that the victim no longer has the mental
capacity to take care of his or her own financial affairs.
4) When an elderly victim
does report the crime, they often make poor witnesses. The
con-man knows the effects of age on memory and he is counting
on the fact that the elderly victim will not be able to
supply enough detailed information to investigators such
as: how many times did he call? What time of day did he
call? Did he provide a call back number or address? Was
it always the same person? Did you meet in person? What
did he look like? Did he/she have any recognizable accent?
Where did you send the money? What did you receive if anything
and how was it delivered? What promises were made and when?
Did you keep any notes of your conversations? The realization
that they have been victimized may take weeks or, more likely,
months after contact with the con-man. This extended time
frame will test the memory of almost anyone.
5) Lastly, when it comes to
products that promise increased cognitive function, virility,
physical conditioning, anti-cancer properties and so on,
older Americans make up the segment of the population most
concerned about these issues. In a country where new cures
and vaccinations for old diseases has given every American
hope for a long and fruitful life, it is not so unbelievable
that the products offered by these con-men can do what they
say they can do.
Those suffering from cancer,
heart disease, multiple sclerosis, diabetes, HIV, Parkinson's
disease and other serious illnesses are targeted for one simple
reason. The con-man knows that many of these individuals are
desperate to find some reason to believe that a "miracle
cure" exists. These people, many of whom are elderly
but some who are not, are willing to pay whatever price is
asked and subject themselves to whatever risk is required
to gain an advantage over their disease. Regrettably, in most
cases, it is the con-man taking advantage of these individuals.
In addition to the financial loss, these patients often lose
valuable time away from conventional medical treatment which
could have resulted in a higher quality of life and/or prolonged
life. Although the FBI has identified several instances where
dietary and nutritional supplements promise anti-aging effects
have been utilized to defraud American citizens, the number
of complaints and related dollar losses have not indicated
a substantial crime problem falling within the jurisdiction
of the FBI. However, the FBI has been involved in several
investigations concerning "miracle cures" in which
the bureau has joined forces and shared resources with the
Food and Drug Administration (FDA), the U.S. Postal Inspection
Service (USPIS) and others.
Several examples of previous
cases are as follows:
In March 2001, Gregory E. Caplinger,
DBA, International Institute of Medical Science hospital and
clinics, was indicted in the eastern district of Pennsylvania
on 39 counts of wire fraud. Caplinger had falsely represented
himself to be a British and U.S. trained physician with a
doctor of science degree who was board certified in internal
medicine, immunology and oncology. Caplinger used these false
credentials and other misrepresentations to convince seriously
ill patients to travel from the United States and Canada to
the Dominican Republic for treatment. He convinced patients
to travel to the Dominican Republic to participate in his
immunological protocol at his clinic which used an medication
called "Immustim." Caplinger claimed that "Immustim"
was a medication effective in the treatment of cancer, HIV/Aids,
Epstein-barr virus, hepatitis, chronic fatigue syndrome, allergies
and other immunological dysfunctions. Caplinger received in
excess of $500,000 from patients and approximately $2,000,000
from investors he conned into providing him funding for his
"clinic".
Caplinger fled the country on
the seventh day of his trial and eventually turned himself
in to authorities in the Dominican Republic. Investigation
in this matter also determined that Caplinger was not a doctor
and had been sited for practicing medicine without a license
in 1984 in Florida. He also plead guilty to charges of practicing
medicine without a license in the state of North Carolina
in 1988.In 1993 he plead guilty to theft charges in Florida
for taking money from the elderly after promising to treat
patients for Alzheimer's disease. Caplinger is awaiting sentencing
and could receive 195 years in jail and a fine of $9.75 million.
The FBI is also involved in
a number of on-going cases which I am not at liberty to discuss
in detail at this time. However, I can provide you with a
summary of several cases without identifying the subjects
of these investigations.
In September 1999, the Salt
Lake City office of the FBI initiated a joint investigation
with the FDA. This investigation centered on the activities
of an individual treating seriously ill people with an "all
natural" product he produced, the ingredients of which
he has advised came to him in a "dream." According
to the subject of this investigation, this product was effective
in treating migraine headaches, cancer, multiple sclerosis,
Parkinson's disease, chronic pain, spinal cord injuries and
other illnesses. The subject advised patients that his "all
natural" product contained botanical extracts, B vitamins
and amino acids. Extensive chemical analysis of the product
performed by the FDA determined that among other things, it
contained procaine and lidocaine. The cost of these treatments,
when performed in the subject's clinic, was $10,000 each.
Information developed through investigation determined that
the subject had contracted with a pharmacist to mix his product
and paid the pharmacist $15.00 per vile. The cost to patients
was $500.00 per vile. Hundreds of victims sought treatment
from this individual with many parents bringing paraplegic
children, who had suffered spinal cord injuries, in the hope
that treatment by the subject might result in their being
able to walk again. Many of the victims didn't have the financial
resources to pay for the treatments and resorted to mortgaging
their homes and borrowing from relatives. In one case, a church
mobilized its parishioners and through fund raising activities,
were able to pay the cost of the treatments for one child.
Many of the patients learned of this "miracle treatment"
through chatrooms on the Internet frequented by those suffering
from specific and serious diseases and ailments. Search warrants
were executed at the subject's home, one clinic in Salt Lake
City as well as the home of the pharmacist who resided in
California.
In November 2000, the Richmond
office of the FBI initiated a wire fraud investigation against
an individual residing in Henrico county, VA, who was representing
himself as a doctor and a surgeon. This individual claimed
to have found an herbal cure for various terminal cancers.
He was selling a medicine "soup" which he created
and claimed would cure cancer. The charge for a 45 day supply
of this "soup" was $10,000. The subject of this
investigation advised prospective clients that he had cured
the queen of Thailand of cervical cancer and cured his own
wife of stage IV brain cancer. He also claimed to have cured
more than 100 others with his "soup". One victim,
identified through investigation, paid $85,000 for "soup"
and a skin treatment to cure his skin cancer.
Some of the "patients"
learned about the "soup" treatments by word of mouth
and others via the Internet. Some of the patients were told
that their medical diagnosis was wrong and they did not have
cancer. He told them they were only suffering from a virus
which, not coincidently, his "soup" would cure.
In some instances, victims were instructed to discontinue
their conventional medical treatment and to rely solely on
his soup. To date, investigation has determined that the subject
received over $350,000 from the sale of his soup and bogus
medical treatments.
The subject was arrested on
2/16/2001 after investigation determined that he had begun
to liquidate various bank accounts. Approximately $207,660
and two vehicles were seized at the time of his arrest.
In April 1999, the San Diego
office of the FBI initiated an investigation of an individual
who advocated a regime of herbal concoctions, the use of an
electric device referred to as a "zapper", and the
removal of all metal from the patients mouth, to cure cancer.
One of this individuals patients had been diagnosed with breast
cancer through conventional medical procedures. A malignant
tumor, approximately 1.5 centimeters in size, was discovered
and the patient's medical doctor recommended surgery to remove
it. This patient, convinced that the subject of this investigation
could cure her cancer and on his recommendation, had all of
her teeth containing fillings removed by a dentist. Following
treatments and tests costing several thousand dollars, the
subject advised the patient that her cancer was "healing".
At the urging of family members, the patient returned to her
regular physician and learned that the tumor was not healing
and had actually grown to 14 centimeters.
This investigation determined
that the subject was already wanted on a state arrest warrant
in Nashville, Indiana, for the unlawful practice of medicine.
He was arrested on the outstanding warrant and returned to
Indiana for prosecution.
The FBI is also involved in
several other on-going investigations which, due to the sensitive
nature of these investigations, can not be discussed at this
time.
The FBI will continue to identify,
investigate and work to prosecute those who would take advantage
of the elderly and the seriously ill. At this time I would
be happy to answer any questions.
Thank you.
|