Originally published on Forbes.com.
A cautionary tale about elder abuse with some unlikely heroes is at the heart of the Tax Court decision in the case of Angelina Alhadi. The tax issue was whether payments to Ms. Alhadi were taxable income or non-taxable gifts or “loans”. It did not go well for her. She was pro se. Her lawyer had been allowed to withdraw because she had stopped paying him. Given the stakes involved, it would seem to have been a good idea to keep counsel on, but it may be that all the money was gone.
The Story Behind The Story
Ms. Alhadi was providing care of a sort for Dr. Arthur Marsh who had been born in 1915. Judge Holmes describes his hard-scrabble upbringing
His parents weren’t too far removed from the first homesteaders, and he grew up on their farm in Plentywood as the fifth of seven children. His mother worked all day to do the laundry and prepare meals for her family, while his father tended to the land. Neither had much education, and their lives were recorded only in the short and simple annals of the poor. Many decades later he recalled that there hadn’t been much room for tenderness. He never once heard his father tell his mother that he loved her, and he never once saw his parents show affection to each other. Art’s education was cut short by the Depression, and it seemed he could look forward to the same hardscrabble life.
Thanks to service during WWII and the GI Bill, he was able to obtain an education and open an optometry practice in Gilroy, CA where he prospered. He lived modestly.
Dr. Marsh also set down deep roots in his town. He joined civic associations like the Rotary Club, grew thick connections in his profession, and was a faithful member of his local church. He loved the outdoors and would often take vacations throughout the West with his brothers and sisters and nieces and nephews. But he never married or had children of his own, and when he returned home, it was always to the same second-floor apartment on Carmel Street. It was only about 800 square feet, and Dr. Marsh furnished it modestly–a small table with a single chair on the right when one walked in, a living room connected to a kitchenette, and a single bedroom and bath. Dr. Marsh was by no means a miser, but the poverty of his childhood and youth had–as it did to so many of his generation–marked him for life and made him frugal. He rented his little apartment for $175 a month and got by largely on Social Security. But Dr. Marsh had been a good businessman, saving over $1 million before he retired in the `80s and investing it prudently well into retirement until it reached nearly $3 million. His friends sometimes joshed him about his habits, but he would just tell them that his wealth was insurance against having to leave his apartment of 50 years to end up in a nursing home.
As it turns out, there are situations that make nursing homes look not so bad.
Getting A Care Giver
Dr. Marsh was hospitalized in 2007 and his physician determined that he could not discharge him to go back to living alone in his second-floor apartment. There was a host of things including dementia. That’s when Ms. Alhadi stepped up and volunteered to take care of him.
Her pay started off pretty good and then got better
Dr. Marsh hired Ms. Alhadi at an hourly rate, and she deposited her first paycheck from him in January 2007. She was paid according to their initial hourly arrangement through March. But then he agreed to pay her $6,000 a month for her services–even though the going rate was $3,750. He also gave her $1,000 a month for groceries–even though he needed only $400 a month to feed himself, and his minifridge could hold only about $50 worth of food. Ms. Alhadi began making deposit after deposit of cash into her bank account. Dr. Marsh’s payments to Ms. Alhadi became irregular. On April 14 he wrote a check to her for $11,100; two days later he wrote her another for $100,000. He also bought her expensive electronic equipment.
And then there were the extras
Ms. Alhadi’s lifestyle began to improve. In June 2007 she used money from Dr. Marsh to make a downpayment on a million-dollar home in Gilroy. After that, she began to pressure Dr. Marsh to help her with her mortgage payments. By the end of November 2007, he had written checks to her that added up to roughly $400,000–which she used to pay off her husband’s $80,000 interest in their old home in Hollister and to remodel her new home in Gilroy. She spent $7,000 on furniture (purchased by Dr. Marsh for her); $8,000 on a new stone facade; $34,000 on landscaping work; and $73,000 on a new pool complete with a spa and a “therapeutic turtle mosaic.”
In case you are wondering what a “turtle mosaic” looks like, I found this, but I couldn’t find the therapeutic kind. The pool triggered a bit of a tiff between the caregiver and her charge, but she managed to overcome it.
She told Dr. Marsh about her plans for it before work began. He said he didn’t see how it made sense for her to build a pool until she had her house paid off. She ignored him. Then one day she presented Dr. Marsh with the $22,000 invoice for digging the hole for the pool. He roused himself to ask her: “Who the hell is going to pay for it?” She gave him a look as if to say: “Like who the hell do you think? I expect you to pay for it.” Dr. Marsh then relented and later said that he felt he had to pay for the pool because the work was already done and he had to accommodate his caregiver.
Who Can Help?
Doctor Marsh’s siblings had all passed away. There was one niece who tried to keep up with him by phone, but Ms. Alhadi managed to run interference on that. And this is where the story takes an interesting turn. Who is it that came to Doctor Marsh’s rescue? It was the people from Vanguard, who spoke to him on the phone to confirm that he had really written five $100,000 checks to Ms. Alhadi.
The calls were recorded, which was not a big help to Ms. Alhadi, when the Tax Court judge listened to them.
The people at Vanguard now knew something was seriously wrong, and they sent a report of suspected elder abuse to the California Department of Health and Human Services in November 2008. The Department assigned Susan Fowle to investigate Vanguard’s report. She is part of the Financial Abuse Specialist Team that investigates elder-abuse referrals for the Santa Clara County Public Guardian’s Office. Investigator Fowle–whom we find to be an entirely credible witness–went to visit Dr. Marsh with two other members of her team and interviewed him for two hours. When she asked him about the money he was paying to Ms. Alhadi, he was so adamant that he hadn’t written five $100,000 checks that Investigator Fowle had to call Vanguard again after the interview to make sure it was true. That was when she learned he had written a lot more than just five.
The saddest part of the whole story is the poor care that Dr. Marsh was getting. Among the examples listed is the condition of the bathroom.
really filthy . . . . We pulled up the bath mat because it was older and I wanted to get a new one I thought, you know, just to get the bathroom cleaned up. Underneath it, there was gelled mold all under this bath mat, which told me that nobody was also cleaning the bathroom.
The Santa Clara Public Guardian put Doctor Marsh under a temporary conservatorship in January 2009. It did not last long as he died on February 13.
The Arthur J. Marsh Trust managed to recover $310,000 from Ms. Alhadi. The million dollar home was lost to foreclosure, probably the turtle too.
One move that Santa Clara County made on behalf of the trust that I would question was filing 1099s for payments made to Ms. Alhadi for 2007 and 2008. I’m not sure they were required and if they weren’t it just created another creditor chasing Ms. Alhadi.
Apparently if a caregiver is going to bilk an elderly client, Santa Clara County is not the place to do it thanks to their Financial Abuse Specialist Team.
The Santa Clara County model differs from other financial abuse prevention teams in that “rapid response” by the team members is a central component. “Immediacy is important to freeze assets and to prevent financial destitution,” says Lee Pullen, Director of the Department of Aging and Adult Services. When APS receives a call through its telephone hotline, APS immediately determines whether the case is appropriate for FAST. A referral to FAST triggers a prompt visit to the elder or dependent adult by at least two members of the team.
She Owes Some Taxes
Not surprisingly the Tax Court found against Ms. Alhadi
finds that through undue influence as defined in California law she obtained $451,891.05 in 2007 and $474,983.22 in 2008 that she should have reported as income on her returns
The income was subject to SE tax also and her returns were found to be fraudulent. Something tells me that not a heck of a lot of that tax will be collected.
Other Coverage
Joe Kristan covered the case thoroughly concluding.
There is no happy ending. This is a harrowing and horrifying case. But it happens all the time, if not usually for so much money. The only moral I can see is that we need to be aware that this happens, and to speak up if something looks suspicious. We may all face that kind of vulnerability some day.
Lew Taishoff decided to pass on it. He wrote me that it was too fact specific. He also indicated that the California elder abuse laws are much more extensive than those of most other states. Maybe the rest of us should catch up.
The Gilroy Dispatch ran a story in 2009 – Elderly man gives up $1M in possible ‘sweetheart scam‘ covering the heirs litigating against Ms. Alhadi.