Minnesota safeguards spending of vulnerable adults' money

Auditors working in the Minnesota courts have exposed problems ranging from dubious fees to outright thefts by people appointed to safeguard more than $875 million held by dementia patients and other vulnerable adults.

In one Houston County case, the parents of a young man with cerebral palsy used his money to buy a truck for use on the family's Alpaca ranch, noting that he enjoyed spending time with the animals. The judge ordered them to repay his estate $21,991 and post a bond of $200,000.

In Anoka County, auditors raised concerns about a conservator overseeing her husband's accounts. They noted $20,000 in new debts, some undocumented loans to their daughter, the sale of their home without court approval, and $35,000 in ATM withdrawals, including many at Grand Casino. That matter is pending judicial review.

Auditors also raised concerns in several cases about professional conservators and their attorneys who charged high fees to handle simple tasks like opening e-mails and answering phone calls. One lawyer, working alongside a conservator in a Hennepin County case, billed $120 to drop a letter at the post office. He's appealing an order that he repay $9,192 in fees.

"Money brings out the worst in people," said Judge Jamie Anderson, who has overseen Hennepin County's conservatorship cases for the past three years.

Judges have appointed conservators to manage the money of more than 5,600 Minnesotans deemed unable to do it themselves. About two-thirds of the conservators are family members of the protected persons. For the rest, typically where families are at odds or have large estates, the courts draw from a few hundred professionals.

Since 2012, auditors working for the Minnesota court system have been scrutinizing how those individuals spend the money entrusted to them, a process that has accelerated since a more robust financial reporting system went online in 2014. Most audits find everything in order. But in 10 to 15 percent of the cases, auditors find problems serious enough to require a judge's review.

Concerns over financial exploitation of seniors came to a head in 2010. The Government Accountability Office reported that it had identified hundreds of allegations of physical abuse, neglect and financial abuse by their guardians. Meanwhile, the Minnesota Judicial Council approved a statewide electronic conservatorship reporting system, but it initially relied on scans of paper records.

That system has evolved into the only mandatory, online financial reporting system for conservators in the country. It's called MyMNConservator, and it alerts the court to red flags in a protected person's financial reports.

Under the old system, it was up to judges and their staff to wade through scanned financial reports, unverified receipts and sometimes handwritten account summaries. Anderson said the task was nearly impossible.

"We were doing the best that we could, but to say that it [MyMNConservator] is an improvement on what we had before is an understatement," she said.

In an Anoka County case, auditors learned that a former employee of Lutheran Social Service had allegedly stolen $4,230 from a client's conservatorship account. The agency repaid the money. The former employee, Donetta L'nee Grimes-Norris, now works in the state of Georgia's Division of Family & Children Services. She is scheduled for trial on one count of financial exploitation of a vulnerable adult. Neither she nor her attorney returned calls for comment.

Cate Boyko, manager of the Conservator Account Auditing Program, said her staff just provides the facts; judges decide what's appropriate. She said auditors may look at where certain spending took place, or at unusual spending patterns, especially for major transactions, gifts and travel that require court approval.

"If it's an older gentleman that lives in a care facility and the spending is in a nail salon and lingerie shop, then we point that out to the court," Boyko said.

Auditors alerted the court in St. Louis County to a case involving a woman who was conservator for her father, Howard Hakkila, who suffered a traumatic brain injury. In one year, spending from his account had increased 58 percent, and auditors were suspicious about charges at a beachwear shop in Excelsior among other financial irregularities.

The court appointed a new conservator and ordered the man's daughter, Donna Hellman, to repay $24,746. She eventually was charged with financial exploitation of a vulnerable adult, and sentenced to two years of probation.

Boyko said sometimes conservators have paid back money shortly after receiving notice of an audit.

The National Association for Court Management (NACM) selected the auditing program for an achievement award last year.

Anderson, the Hennepin County judge, said most conservatorship problems result from misunderstandings rather than intentional wrongdoing. She noted that Minnesota law also protects vulnerable adults by requiring a bond for conservatorship holdings exceeding $10,000, and that Hennepin County requires a bond for all conservatorships. Judges can order the bondholders to reimburse protected persons for certain losses.

Minnesota judges say they hope audits will prevent some conservators from committing fraud, spot those who do earlier, and educate honest conservators — the vast majority — on the proper way to manage the funds of protected persons.

Auditors rate audits on a scale of 1 to 4 based on the number and kinds of problems they find. The Star Tribune reviewed court records for more than 100 conservatorship cases with level 4 audits — the kind that require judicial review — plus some other, especially contentious cases.

A clean audit does not always mean a conservatorship is going smoothly.

The court auditors found only minor issues when reviewing the finances of Patricia P. Heinrich, who was named "Mrs. Minnesota" in 1960 and went on to work for Dale Carnegie and Heinrich Envelope Co. in Minneapolis, amassing an estate worth over a million dollars.

Before she died, Heinrich's five children fought bitterly among themselves over her assets, which resulted in the appointment of First Fiduciary Inc. as an emergency conservator. Daughter Catherine O'Connor, who took care of her mother for years, sought to be named guardian to manage her nonfinancial needs. First Fiduciary objected, arguing that she interfered with her mother's caregivers, "unduly influenced her mother," and failed to cooperate with the conservator or other family members.

A Carver County judge ordered a forensic audit, which raised serious questions about a property transfer Heinrich made to O'Connor, as well as $453,350 in gifts O'Connor helped her mother make to family members between 2011 and 2013.

O'Connor surrounds herself with boxes of court documents and financial records that she says would exonerate her, but she wonders if it's worth the fight. The conservator gets to use the protected person's funds to pay the legal fees.

"It's a battle nobody will win because they'll drain the account," O'Connor said.

Dan Lodahl, president and CEO of First Fiduciary Inc., says most of the cases his company handles involve "dysfunctional families." Heinrich's family is a classic case of that, he said. He noted that every decision a conservator makes can be reviewed by the court, adding that his company has been in business since 1959 and has never had a successful claim against one of its bonds.

Lodahl praised the state's auditing system, which he said heads off many problems and brings greater consistency to the financial reports.

Washington County Judge John McBride agreed.

"I'm not seeing nearly as many problems as we used to, where we would have to bring people in and get some explanation of what's going on," he said.

McBride said many times there's a good explanation for expenses the auditors found suspect. But when the expenses involve substantial funds or valuable gifts that are going to the conservator or the conservator's family, "then you get really suspicious," he said. "Ultimately they have to manage the ward's funds to the benefit of the ward and not to their own benefit."

Dan Browning • 612-673-4493