Former Kaua'i resident Ellen Hyman needed money to help pay for her cancer treatment, so she sold her interest in some Kaua'i property in 2004.

Hyman instructed her Hawai'i attorney, Andrew Lichtenberg, to wire the $373,000 in proceeds directly to her Mainland bank account.

The funds represented the elderly woman's life savings.

"No way do I want that money in your account at all — under any circumstances," Hyman said in a handwritten letter to Lichtenberg in July 2004.

Lichtenberg ignored her instructions. He deposited the money in his client trust account and left the country — without telling Hyman of his whereabouts. She never got a dime of that money.

Lichtenberg eventually was found in Indonesia and brought back to Hawai'i, where he was convicted in federal court in April of wire fraud, money laundering and making a false statement in applying for a passport. The conviction followed his disbarment by the Hawai'i Supreme Court for ethical violations in his dealings with Hyman.

The Lichtenberg case reflects what some say is a growing but largely unreported problem: Seniors being ripped off by dishonest professionals, telemarketers, brokerage firm workers, door-to-door salespeople and other merchants who are supposed to be serving, not exploiting, their elder customers.

As the baby boomers enter their retirement years, unscrupulous business people are recognizing that the pool of potential victims is expanding — and that vulnerable seniors sometimes make easy targets.

"The scams are just constantly morphing," said Bonnie Horibata of the Better Business Bureau of Hawaii, which has a hot line (536-8609) for seniors to report such schemes. "The (perpetrators) have developed it into an art form."

An Advertiser series in May on elder financial abuse generated dozens of e-mails and phone calls from readers, some of whom expressed concern about merchants who defraud seniors through high-pressure sales tactics, deception or outright theft.

It's not known how prevalent that problem is here. Like most other areas of elder financial abuse, no reliable statistics are available, either locally or nationally.

But officials who deal with Hawai'i's elderly believe the problem is widespread. Based on anecdotal evidence, Derrick Ariyoshi of the state's Executive Office on Aging said estimates of hundreds of victims a year would understate the problem.

At presentations Ariyoshi gives to senior groups, the majority of audience members typically indicate they have been victimized or know someone who has been victimized.

In the insurance business, enough cases have surfaced that the state's insurance division, in conjunction with the industry, started giving talks about a year ago to senior groups to help them guard against possible scams.

Elder-advocate groups also have held scam-awareness sessions in recent months statewide, and the meetings have attracted hundreds of participants. Before a recent AARP session, the organization anticipated 200 to 300 people; 600 showed up.

Seniors often make inviting targets by scammers of all sorts because the elder residents tend to have assets, can be very trusting of strangers and typically have the time to listen to the marketing pitches.

"They're probably the No. 1 target of financial fraud or abuse in the securities field," said Patricia Moy, senior enforcement attorney for the state's Securities Enforcement Branch at the Department of Commerce and Consumer Affairs. "They're the ones who have the nest eggs sitting there."

FEW CASES REPORTED

The nest eggs can be targeted in many different ways.

Assistant U.S. attorney Tracy Hino has two pending cases in which a teller at a bank and a small credit union allegedly stole money from elder customers.

In one case, the credit-union teller stole roughly $30,000 from dormant accounts, mostly held by senior customers, including a 95-year-old, according to Hino. The teller would move the funds into a friend's account, then issue cashier's checks that the friend would endorse, he said. The alleged thefts were discovered after the teller quit late last year.

In the other case, the bank teller altered the withdrawal slips of two elderly customers, adding $1,000 to each of their requested amounts without their knowledge, Hino said. The teller allegedly pocketed the extra funds.

Charges have yet to be filed in either case.

Getting convictions in fraud schemes that target seniors is unusual, partly because so few cases are reported and partly because of the difficulty in prosecuting them.

Hino prosecuted one such case involving Toni Freitas, a former trust company and brokerage firm worker who used inside information to steal more than $80,000 from three elderly people who had dealings with her then-employers.

When Freitas worked for Merrill Lynch several years ago, she used personal information of a prospective customer to obtain fraudulent credit cards and charge more than $14,000 in purchases. Freitas resigned from Merrill Lynch after company officials started asking questions about her actions.

When she worked for Pacific Century Trust in the late '90s, Freitas stole more than $71,000 from an elderly couple over a 29-month period by forging checks and making ATM cash withdrawals in their names. Freitas oversaw the trust account for the husband and wife, who both were in their 90s. One was blind and the other had memory problems. Freitas was fired from Pacific Century.

"This case certainly shows you can't be too vigilant in monitoring your finances," Hino said.

After Freitas pleaded guilty to bank fraud, access device fraud and identity theft for what she did to her three victims, she was sentenced in federal court in 2005 to two years in prison. The sentence imposed by U.S. District Judge David Ezra included the maximum enhancements available under federal guidelines because Freitas targeted vulnerable elderly victims and abused her position of trust.

Assistant U.S. attorney Wes Porter said the government plans to cite the same reasons in seeking an enhanced prison term for Lichtenberg, the former Kaua'i attorney, when he is sentenced in August. The government may ask for more enhancements because Lichtenberg has done nothing to right the situation with Hyman, Porter said.

Lichtenberg, who is being detained in a federal facility pending sentencing, could not be reached for comment.

Hyman, 63, who is pursuing a civil lawsuit in Hawai'i to recover her money, has not only had to deal with the loss of her life savings but the severe damage to her home in a suburb just outside of New Orleans. More than half her house was destroyed during Hurricane Katrina last year. She was among the storm victims who had to flee to a rooftop to escape the floodwaters.

The stress of dealing with the Hawai'i litigation and her battles with her insurance company and others to get her home repaired recently landed Hyman in the hospital because of ulcers.

"It continues to be an absolute nightmare," the retired jewelry designer said by phone from Mandeville, La. "I'm fighting there and I'm fighting here. It's just been devastating."

Although Hyman hasn't recovered any money from Lichtenberg, she received $50,000 from the title company that handled the real estate deal and $50,000 from a Hawai'i fund that compensates clients who suffer losses because of attorney misconduct, according to Jeff Crabtree, her Honolulu attorney.

WIDE EXPLOITATION SEEN

Elder advocates and others believe the problem of seniors being financially exploited by business people is far more widespread than what is indicated by cases that come to the attention of authorities.

Seniors generally don't like to file complaints, especially for smaller frauds, according to state officials.

Hilo attorney Gary Murai recently had a case in which an 80-year-old man was scammed by a painter but was reluctant to report the contractor to authorities. The homeowner paid $2,500 upfront to have his house painted, with the remaining $2,500 due upon completion of the job.

After the initial amount was paid, the painter brought his equipment to the man's house but never showed up after that. The homeowner kept leaving phone messages for the painter but never got his calls returned.

Murai said the 80-year-old was reluctant to report the scam partly out of embarrassment of being swindled.

After Murai was contacted, he filed a civil lawsuit last year on the man's behalf and used a state law that allows enhanced penalties if a merchant targets an elderly consumer in a fraud scheme. Just like federal law permits judges to add months or even years — depending on the severity of the offense — to a criminal's sentence if a vulnerable victim is targeted, the state law permits the court to triple damages in a civil lawsuit and allow the recovery of attorney fees. The state does not have an enhanced sentencing statute on the criminal side for elder financial abuse.

In the case involving Murai's client, the homeowner sought more than $17,000 in penalties — far more than the $2,500 he originally paid the painter.

That apparently got the painter's attention. Shortly after the lawsuit was served, his wife contacted Murai, and a check for $2,500 arrived a few days later, the attorney said.

ANNUITY TROUBLES HIGH

The enhanced-penalties statute also is being cited in a pending civil lawsuit by the Office of Consumer Protection against a group of financial services companies and affiliated individuals accused of defrauding mostly elderly clients in the sale of investment products.

Among other charges, the defendants were accused of using misleading or deceptive practices while selling elderly customers deferred annuities that often did not have payouts for 10 or 20 years — investments considered inappropriate for people in their 60s, 70s and 80s.

The defendants denied wrongdoing.

AARP, the senior advocacy group, says complaints about variable annuities are among the most common type it gets in Hawai'i.

In one case handled by Moy's DCCA division, a securities salesman was permanently barred from engaging in securities transactions in Hawai'i as part of a settlement of allegations that he violated state law by forging signatures and investing client funds in variable annuities without the clients' permission. The salesman, Lawrence Sullivan, also pleaded guilty last year in a related criminal case to three counts of theft, 11 counts of forgery, three counts of securities fraud and one count of money laundering in his handling of investments for a couple in their 60s.

Sullivan was sentenced to 60 days behind bars and five years' probation in the criminal case.

"The defendant now recognizes and realizes what it is like to lose everything," his attorney said in a December court filing. "And most importantly, the defendant now feels what the complaining witnesses must have felt when they realized that they had lost their money as a result of the defendant's acts."

Sullivan didn't respond to a request for comment relayed through his attorney.

The tactics of door-to-door salespeople also generate complaints.

In one OCP case, several salespeople were accused of targeting elderly residents via telephone pitches, then going to their homes and using confusing and bullying tactics when selling vacuum cleaners, air purifiers, vitamins and personal grooming products. The defendants misrepresented features of what they were selling, charged grossly inflated prices and failed to provide receipts, requested refunds and promised services, the civil lawsuit alleged.

The state cited the elderly-targeting provision in seeking enhanced penalties against the defendants.

The case was settled in 2003 with the defendants agreeing to pay more than $37,000 in penalties to the state and customers named in the litigation. The defendants did not admit or deny wrongdoing.

In at least two high-profile lawsuits involving major drug companies, enhanced penalties were or are being sought because seniors allegedly were targeted in fraud schemes.

Interstate Pharmacy Corp. recently agreed to a $3.2 million settlement in a class-action lawsuit in which the company was accused of selling recycled pills to Hawai'i's nursing home patients. The company denied any wrongdoing.

The state also is seeking enhanced penalties in a lawsuit recently filed against more than 40 drug companies for allegedly defrauding taxpayers and seniors by charging inflated prices for prescription drugs. The lawsuit is pending.

Murai, the Hilo private attorney who previously worked for Legal Aid Society and the state Attorney General's office, said having enhanced civil penalties is beneficial. But many individual scam artists don't have assets in their names, making the enforcement of civil judgments difficult, he said.

"Quite often the bad guys are judgment proof," Murai said. "These financial judgments don't scare them. Their scams are too profitable."

Reach Rob Perez at rperez@honoluluadvertiser.com.