    [Senate Hearing 109-316]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-316

           OLD SCAMS-NEW VICTIMS: BREAKING THE CYCLE OF VICTIMIZATION

    =======================================================================

                                    HEARING

                                   before the

                           SPECIAL COMMITTEE ON AGING
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                                 JULY 27, 2005

                                   __________

                               Serial No. 109-13

             Printed for the use of the Special Committee on Aging

                        U.S. GOVERNMENT PRINTING OFFICE
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    _____________________________________________________________________________
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                           SPECIAL COMMITTEE ON AGING

                         GORDON SMITH, Oregon, Chairman
    RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
    SUSAN COLLINS, Maine                 JAMES M. JEFFORDS, Vermont
    JAMES M. TALENT, Missouri            RUSSELL D. FEINGOLD, Wisconsin
    ELIZABETH DOLE, North Carolina       RON WYDEN, Oregon
    MEL MARTINEZ, Florida                BLANCHE L. LINCOLN, Arkansas
    LARRY E. CRAIG, Idaho                EVAN BAYH, Indiana
    RICK SANTORUM, Pennsylvania          THOMAS R. CARPER, Delaware
    CONRAD BURNS, Montana                BILL NELSON, Florida
    LAMAR ALEXANDER, Tennessee           HILLARY RODHAM CLINTON, New York
    JIM DEMINT, South Carolina
                        Catherine Finley, Staff Director
                   Julie Cohen, Ranking Member Staff Director

                                      (ii)

    ?

                                C O N T E N T S

                                  ----------
                                                                       Page
    Opening Statement of Senator Gordon Smith........................     1
    Opening Statement of Senator Herb Kohl...........................     2
    Opening Statement of Senator James Talant........................     3

                               Panel of witnesses

    Lois Greisman, esq. associate director, Division of Planning and
      Information, Federal Trade Commission, Washington, DC..........     4
    Zane M. Hill, esq., acting assistant chief inspector, United
      States Postal Inspection Service, Washington, DC...............    19
    Anthony R. Pratkanis, Ph.D., professor of Psychology, University
      of California at Santa Cruz, Santa Cruz, CA....................    40
    Denise C. Park, Ph.D., co-director, National Institute on Aging
      Roybal Center for Healthy Minds, University of Illinois,
      Urbana-Champaign, IL...........................................    53
    Helen Marks Dicks, esq., director, Elder Law Center Coalition of
      Wisconsin Aging Groups, Madison, WI............................    71
    Vicki Hersen, director of operations, Elders in Action, Portland,
      OR.............................................................    81

                                    APPENDIX

    Written statement of Melodye Kleinman on behalf of WISE Senior
      Services.......................................................    93
    Written testimony from Stetson University, College of Law,
      Gulfport, FL...................................................    97

                                     (iii)

           OLD SCAMS-NEW VICTIMS: BREAKING THE CYCLE OF VICTIMIZATION

                                  ----------                              --

                            WEDNESDAY, JULY 27, 2005

                                           U.S. Senate,
                                    Special Committee on Aging,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 2:32 p.m., in
    room SD-106, Dirksen Senate Office Building, Hon. Gordon Smith
    (chairman of the committee) presiding.
        Present: Senators Smith, Talent, Kohl and Carper.

          OPENING STATEMENT OF SENATOR GORDON SMITH, CHAIRMAN

        The Chairman. Good afternoon, ladies and gentlemen, we
    welcome you all to this hearing of the Senate Special Committee
    on Aging. Today's hearing is the first in a series that will
    examine consumer fraud and identity theft issues relating to
    older Americans.
        According to the Administration on Aging, nearly 40 percent
    of America's seniors rank fear of fraud ahead of their concern
    for health care and the crisis attendant to it and even higher
    than terrorism. In all, the Nation loses $40 billion per year
    to telemarketing fraud and over $50 billion to identity theft.
    These crimes rob America's seniors of their dignity and
    retirement security.
        As we will hear from the Federal Trade Commission, Internet
    auctions, prize and sweepstakes fraud and lottery scams top the
    list of fraud complaints received from Americans age 50 and
    older. What is most disturbing is that these scams routinely
    top the FTC's annual list of top consumer frauds in the nation.
    It seems that even though we are aware of their use, scam
    artists remain successful in pitching old scams to new victims,
    perpetuating the cycle of victimization.
        Through today's hearing I hope we will make progress in
    finding effective means to break this cycle. Fortunately, a
    number of Federal, state and community programs, especially
    groups in Oregon such as Elders in Action, have made a positive
    difference in helping seniors prevent and recover from fraud
    and identity theft crimes. However, I believe we can and should
    do more. Working with my colleagues, I have introduced
    bipartisan identity theft legislation that would, among other
    things, place restrictions on the solicitation of Social
    Security numbers, allow consumers to place a security freeze on
    their consumer credit reports, and require all entities that
    handle sensitive personal information to provide notice to
    affected consumers in the event of a security breach.
        I am also mindful that legislation and consumer education
    must work in tandem. As reflected in the consumer education
    research that will be presented to us today, one size may not
    necessarily fit all when it comes to consumer messaging.
        Throughout this Congress I will be inviting state and
    Federal law enforcement agencies, as well as independent
    consumer protection groups, to embark upon a collaborative
    approach to responsible and effective consumer education
    messaging. To further this goal, I welcome today's
    distinguished panelists and again I thank you all for coming
    today.
        I will turn next to my colleague, Senator Kohl, for his
    comments and then to Senator Jim Talent of Missouri for his
    comments.

                   OPENING STATEMENT OF SENATOR KOHL

        Senator Kohl. Thank you, Mr. Chairman, for holding this
    important hearing. We would like to welcome all of our
    witnesses here today as we examine ways to combat consumer
    fraud and identity theft as it impacts our nation's seniors.
        It seems that seniors are being targeted more and more by
    con artists looking for a quick buck. Studies show that up to 5
    million seniors fall prey to financial fraud every year. Just
    last week my Milwaukee office helped a 65-year-old man, who was
    a businessman all of his life, when he responded to an e-mail
    he received encouraging him to invest in a Nigerian business
    venture. The return was supposed to be outstanding. One hundred
    sixty-five thousand dollars later, this man is left with
    nothing but an empty retirement account and his wounded pride.
    Although the FBI was contacted, he was told that these scams
    are so common and so difficult to trace that they could not do
    anything to help him recover the money that he has lost.
        Seniors like this man become targets every day. They are
    trusting and come from a generation when business was often
    conducted on a handshake. Unscrupulous criminals are exploiting
    this trust and using it to their advantage. Preying on the
    elderly is certainly nothing new but in a day and age when many
    seniors are not technologically savvy, con artists have an
    easier time collecting personal information and using it to
    swindle a person out of their savings more than ever before.
        One way to stem the tide of consumer fraud is consumer
    education. We need to explain what seniors need to watch for
    and how not to be victimized. In my home State of Wisconsin we
    have been working to educate seniors on the pitfalls of
    financial exploitation. My office has developed a brochure that
    not only gives seniors an idea of what to watch out for in
    terms of identity theft, credit card scams, telemarketing
    schemes and fraudulent lotteries, but also lists where seniors
    can turn for help.
        I have also been working with the Wisconsin Coalition of
    Aging Groups, the banking industry, and law enforcement in
    Wisconsin, and recently received confirmation from Federal
    agencies that Wisconsin banks can report suspicious activities
    involving a senior's account to law enforcement officials
    without violating Federal privacy statutes. This is good news
    for seniors and their families and we'll continue to work with
    all of our partners to get the message out to seniors on how to
    avoid being victimized.
        As we examine this issue today, it is critical that we keep
    in mind that senior scams are nothing new. Just as con-men and
    -women have new high-tech ways of conducting fraud, we, too,
    must develop new ways of stopping these criminals.
        So I thank you once again, Mr. Chairman, for holding this
    hearing. We look forward to hearing from our witnesses,
    learning more about how we can put an end to schemes and scams
    targeting our seniors. Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Kohl.
        Senator Talent.

                  OPENING STATEMENT OF SENATOR TALENT

        Senator Talent. Thank you, Mr. Chairman. I think this is a
    very important hearing and I am not surprised that our senior
    citizens rank fear of fraud so highly. They are a target
    because these con artists know that in many cases they have
    worked very hard and tried to save a little money and I think a
    lot of people have a sense that well, the only people who are
    victims are people who perhaps are naive or maybe do not have a
    lot of experience with the world, but that just is not true. I
    was just leafing through the statements and I know a lot of the
    witnesses are going to say that and we know that in our office.
        This is a very important hearing. I hope there is more we
    can do here in the Federal Government to try and help our
    seniors. I also want to echo what you said about the number of
    good state and local programs that are out there. We have
    several in Missouri. I want to mention in particular the
    O'Fallon, Missouri Police Department Senior Citizens Police
    Academy, which has been very effective because the seniors can
    come in and learn about these scams, and also what Clay County
    is doing with an elderly protection initiative for homeowners.
        So I am glad you are holding this hearing. I am very
    interested in what the witnesses have to say and what we can do
    productively to try to help fight this. Thank you, Mr.
    Chairman.
        The Chairman. Thank you, Senator Talent.
        Our first panel will consist of Ms. Lois Greisman. She is
    the associate director of the Division of Planning and
    Information at the Federal Trade Commission. They will be
    releasing a first-of-its-kind report compiling fraud and
    identity theft statistics on Americans age 50 and older. Ms.
    Greisman, I am pleased that you are here and we welcome you and
    look forward to your testimony.
        She will be followed by Mr. Zane M. Hill, acting assistant
    chief inspector at the United States Postal Inspection Service.
    He will be discussing the agency's law enforcement efforts and
    premier a new consumer education video. Mr. Hill, we welcome
    you, as well, and we will hear first from Ms. Greisman and then
    you will be following her.

     STATEMENT OF LOIS GREISMAN, ESQ. ASSOCIATE DIRECTOR, DIVISION
        OF PLANNING AND INFORMATION, FEDERAL TRADE COMMISSION,
                             WASHINGTON, DC

        Ms. Greisman. Thank you very much, Mr. Chairman, Senator
    Kohl. The written testimony submitted represents the views of
    the Commission. My comments and any responses I have to your
    questions reflect my own views and do not necessarily reflect
    the views of the Commission or any individual commissioner.
        I am delighted to have the opportunity this afternoon to
    discuss the Commission's efforts in fighting consumer fraud
    against older Americans. We have worked closely with your
    committee over the years to protect senior Americans and we
    welcome the opportunity to continue these critical initiatives.
        I am also very happy to appear on the same panel as
    assistant chief Inspector Zane Hill. The U.S. Postal Inspection
    Service has been an indispensable partner in the fight against
    identity theft and consumer fraud. Our close working
    relationship has proven both effective in prosecuting
    wrongdoers and efficient in protecting consumers.
        We all are sensitive to the fact that certain fraudsters
    may target older Americans and place them at higher risk than
    the population at large. In 2004 we received almost 650,000
    fraud and identity theft complaints directly from consumers and
    from others. It is this rich source of information that we used
    to develop the extensive report we have provided to the
    committee, which analyzes the complaints received from
    consumers aged 50 and older. As you said, Mr. Chairman, this is
    a unique report that we have produced.
        The FTC uses the information in this report and all other
    complaint information in guiding its law enforcement and
    consumer and business outreach initiatives, and this vital
    complaint information is also made available through our
    consumer sentinel network to over 1,300 law enforcement
    agencies, which in turn use it to identify and prosecute
    crooks. The FTC's report provides a tremendous amount of
    information about what older Americans tell us about being
    victimized. I want to emphasize a few points in that report
    about the fraud data.
        First, older Americans are not immune from any particular
    type of fraud. The most frequent complaints involve fraud about
    Internet auctions, sweepstakes and lotteries, Internet services
    and computers. We see these same complaint categories when we
    look at the entire population, but some things do stand out.
    For example, complaints about sweepstakes rank second for older
    Americans but rank fifth for the entire population and the
    FTC's report shows that the number of sweepstakes complaints
    received increases significantly from consumers aged 70 and
    older, as does the total dollar loss reported by victims.
        The FTC has sued many companies for sweepstakes frauds,
    many of which have been based in Canada. Our goals always have
    been to close down illegal operators and if at all possible,
    get money back to the victims.
        Second, looking at the report it also was striking to see
    that 41 percent of the fraud complaints from older Americans
    are Internet-related. What that means to us as we define it,
    that means that the company initially contacted the consumer by
    the Internet, the consumer responded to a solicitation via the
    Internet, or the solicitation itself concerned an Internet
    product or service. The 41 percent figure itself should not be
    surprising but it is a significant increase from the 33 percent
    figure for consumers aged 50 and older that we saw looking at
    the 2002 data.
        At bottom, we analyzed all the complaint data in the report
    to help us maximize our law enforcement activities. Halting
    fraudulent conduct is a cornerstone of the FTC's consumer
    protection mission in protecting older Americans, whether the
    cases involve alleged sweepstake scams, misrepresentations
    about a purportedly new Medicare program, or health claims
    about the benefits of a dietary supplement called ``Senior
    Moment.''
        Law enforcement, however, is just one tool. We aggressively
    work to reduce fraud and identity theft through consumer and
    business education. We have developed a wealth of educational
    materials that alert consumers to signs of fraud and advise
    them about how to protect their sensitive information. Other
    educational materials inform businesses about how to safeguard
    personal information and how to assist customers who have been
    victimized. The FTC also partners with other agencies and
    organizations to reach a wide audience. The AARP is a key
    partner. Whose many publications frequently include articles
    about how to avoid and report fraud and identity theft. The
    AARP also has cobranded FTC publications and distributed them
    to its members.
        Further, the FTC looks forward to working with this
    committee to ensure that these materials reach senior Americans
    and all other consumers. I have provided the committee with a
    sample of these materials. It is in this large packet of
    information and I would be remiss not to note at the back is a
    ``Do Not Call'' fan, which is one of my favorite programs.
        All of these materials are available on our website, in
    both English and Spanish. We hope to continue conducting
    outreach programs and campaigns with your offices and with
    others to make the Commission's consumer education materials
    and our on-line complaint forms available through your websites
    as we continue our efforts to protect older Americans.
        Thank you for the opportunity to describe the Commission's
    activities. I will be happy to address any questions you may
    have.
        [The prepared statement of Ms. Greisman follows:]

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        The Chairman. Thank you very much.
        Mr. Hill.

        STATEMENT OF ZANE M. HILL, ESQ., ACTING ASSISTANT CHIEF
    INSPECTOR, UNITED STATES POSTAL INSPECTION SERVICE, WASHINGTON,
                                   DC

        Mr. Hill. Thank you very much, Mr. Chairman, members of the
    committee. I want to first of all thank you for the opportunity
    to testify today about crimes against the elderly. The mission
    of the U.S. Postal Inspection Service is to protect the U.S.
    Postal Service as an agency, its employees, and the mails from
    criminal attack and criminal misuse.
        I think I want to show a video at this point in terms of
    our work with crimes against the elderly so you can see what we
    are trying to accomplish here. [Video shown.]
        Before I begin, I would like to acknowledge our Federal
    partner, the Federal Trade Commission, and the wonderful work
    that they have done with us in terms of training initiatives,
    education, legislation, enforcement actions. We have an
    excellent working relationship with them and I think we are
    actually doing some good to protect our seniors from fraud.
        There are countless illegal schemes that violate the
    Federal mail fraud statute, which is the very first consumer
    protection law enacted in 1872. It is still the most effective
    fraud enforcement weapon and postal inspectors have used it for
    over 100 years.
        Last year, for example, we responded to over 82,000 mail
    fraud complaints. Out of that we investigated over 3,000 fraud
    cases and arrested over 1,400 individuals for mail fraud. As a
    result of these investigations there was over $1.2 billion in
    court-ordered involuntary restitution and this was only a
    portion of the total financial impact these crimes had upon
    American citizens.
        Over the years postal inspectors have used the mail fraud
    statute to investigate and prosecute all types of scams. The
    advent of the telephone brought telemarketing scams and then
    the advent of the Internet brought Internet scams. Each of
    these bring their own offerings but really it is in many cases
    the same scam, just a different twist. Eventually the mails
    will become involved in the scheme and that is when postal
    inspectors will become involved in the investigation.
        Because older citizens, the physically challenged and shut-
    ins rely on the mail and these other forms of communication for
    many of their purchases and their personal business, they
    become easy prey for these fraud operators. The problem is
    further compounded by fraud operators who sell the names and
    addresses of their victims to other operators, resulting in
    repeated victimization of many elderly citizens.
        The same holds true for telemarketers. Most offers are
    legitimate but unscrupulous telemarketers can be the smoothest
    of operators and they can quickly defraud people out of their
    life savings.
        Losses attributed to telemarketing fraud are estimated to
    exceed $40 billion per year. Unfortunately, senior citizens are
    shown to be particularly vulnerable to these fraudulent
    solicitations. Fraudsters recognize this and they recognize
    that many seniors are widowed, alone, isolated from family and
    friends, and they take advantage of this. A telephone call from
    anyone to some of our senior citizens is welcome and our
    experience has shown that con artists know how to make the most
    of this. Once they have them on the telephone line, then they
    can manipulate them.
        In searches of fraudulent telemarketers' places of business
    we have discovered the files of the operators that they have
    maintained on their victims. These files tell us a great deal
    about how these cons are worked. The information contains
    intimate details of the victim's health, the names of their
    children, vacation and travel memories, and even information on
    deceased spouses.
        Telemarketers in particular use this information when they
    call their victims to give their sales pitch a personal touch,
    a hook if you will. They will mention family names, inquire
    about their health, and very effectively portray themselves as
    being caring and knowledgeable.
        For these victims, these telephone calls may be one of the
    few regular contacts they have with other people and the
    victims actually sometimes value this interaction with someone
    willing to talk with them. Victims often even defend the fraud
    operators in the continued belief that they are, in fact, their
    friends who are trying to help them win a sweepstakes and gain
    some money.
        Sadly, in our investigation some victims will acknowledge
    that they believed that the fraud operator was taking advantage
    of them but explain that they had no one else that they could
    talk to, and this is a sad commentary.
        One particular technique called the ``You have won''
    scheme, targets elderly victims who have previously
    participated in lotteries, sweepstakes, and other prize-winning
    opportunities. Fraudsters inform these seniors that they have
    own; however, they are required to pay either administrative
    fees, taxes or membership fees before the prize check can be
    mailed. We know how this ends. The victim receives nothing; the
    scam artist receives the fee.
        Another tactic utilized by con artists is to tell a senior
    that they have won a large cash prize and then ask them for
    some identification by providing a credit card number, a bank
    account, or other personal information so that they can verify
    the senior as the winner.
        Armed with this personal financial information, fraudsters
    can quickly clean out the accounts of these unknowing senior
    victims.
        One of the most notorious scams that we have seen against
    seniors is what is known as the reload. It is a very offensive
    tactic that bothers all of us in this business. When fraud
    operators are successful in obtaining money from a victim, they
    often make an attempt to gain even more money. This is the
    reload. In a typical reload, the fraud operator contacts the
    victim again and alters the original scam or represents a new
    scam sweepstakes. Winners may be told that their prize has been
    increased but that additional fees are necessary to claim the
    new prize, and then starts the cycle of the reload. Victims in
    fraudulent investment schemes may be convinced to invest more
    money or to convert their investment to another market product
    which invariably is worth even less than what they initially
    had been sold before.
        Also, fraudulent telemarketers often network with other
    operators and sell or exchange target lists. The con artists
    refer to these lists as ``mooch lists'' or ``sucker lists,''
    and you can tell from the name of the list what they think
    about them.
        If a telemarketer knows a particular senior has fallen for
    several scams, they will call this senior, pose as either an
    attorney or law enforcement officer and advise them that they
    have arrested the con artist from the earlier schemes and
    seized the money. This is the start of the scam. The victim's
    money is described as being held either in a State fund or held
    by the courts. The scam artist will then request a fee to
    release those funds to the victim and in doing so steal from
    the victim again. As you can see from this, there are just
    multiple opportunities under a reload for the victims to be re-
    victimized again and again.
        Many seniors have been robbed of their hard-earned life
    savings through illegal telemarketing and mail fraud schemes,
    but also there is a tremendous emotional cost that associates
    with this. The senior victims lose not only their money but
    also their self-respect and their dignity because they have
    been duped. We have interviewed victims in some of our cases
    who have claimed they could not remember sending anything to
    the operators or out of embarrassment would never acknowledge
    how much money they actually lost. Let me give you one example.
        An example of a recent Inspection Service case highlights
    an 86-year-old widower and World War II veteran from
    Pennsylvania who was the victim of a sweepstakes fraud. Over
    the course of 2 years, this senior lost his entire life savings
    to con artists who repeatedly promised him $850,000 in prize
    money provided he would pay in advance a series of customs
    fees, taxes, and legal fees in addition to his savings account.
    In reading the account of this, it was multiple reloads and
    multiple interactions by different groups that just continued
    to victimize him.
        It gets even worse. After he lost his life savings, the
    victim then used his Social Security income and sold his stock
    shares to cover the purported processing fees for the monies he
    had won. He never received any of the prize or any of the
    sweepstakes.
        Criminal prosecution is an important element in our fraud
    program, but it is not the only tool that we use. We also use
    civil fraud and our administrative authority to shut down the
    use of mails for those fraud operators that are using that as a
    vehicle to commit these crimes. The most important thing that
    we have seen in our good work with the FTC has been in the area
    of consumer education. We think this is probably where we need
    to place a lot of our work and attention to educate them. I
    want to tell you about some of those efforts and the success
    that we have had with them.
        In September 2003, our postal inspectors, in conjunction
    with the Postal Service, the FTC, and other Government agencies
    and private companies, unveiled a national consumer awareness
    program on identity theft known as Operation: Identity Crisis.
    This campaign focused on the ease with which identity theft
    occurs unless consumers take steps to prevent it. The video
    that you watched is one of those types of videos that we do as
    a part of these campaigns.
        Even though this crime affects all age groups, including
    older Americans, according to complaints that the FTC just
    spoke about, the percentage of seniors as a victim group rose
    from 17 to 21 percent, so we are actually seeing an increase in
    the numbers of senior victims to these types of frauds. The
    Inspection Service has recognized for many years that awareness
    in terms of consumer fraud is where our emphasis needs to be.
    We will continue to try to increase those efforts and to
    partner once again strongly with the FTC and other
    organizations to get that message out.
        Prevention efforts must focus on the key factors that play
    the greatest role in identity compromise. Unfortunately, the
    traditional way to steal personal information has not changed
    in terms of identity theft. Obtaining lost or stolen wallets,
    checkbooks, credit cards is still the favorite method,
    according to Congressional Quarterly Research. While this is a
    challenge, it really pales in comparison to the 52 million
    identities that have been compromised through electronic means
    since the beginning of this year. This is why prevention of the
    crime is a priority for the Inspection Service.
        You have all heard the saying ``Crime doesn't pay,'' but in
    this case, it does in a very positive way for some of the
    victims. All of the campaigns that we have been involved with
    have been paid by a unique funding arrangement where we use
    monies received from criminal fines and forfeitures in cases
    where the victims could not be identified and the money could
    not be returned to them, just like the video that you saw. In
    addition, this money also pays for funding for public service
    announcements and other very proactive consumer campaigns that
    we are involved with.
        As you understand, the more that we can get the message out
    to that part of our population, the more we can tell them
    things to look for. They are very knowledgeable. They can
    identify some of these factors. We think that we will be very
    effective there if we can continue that very aggressive push in
    terms of the education.
        Another campaign that we actually did also in 2004 was to
    raise awareness about investment fraud and help consumers avoid
    becoming victims of those types of scams. This one, perhaps you
    remember, was called ``Dialing for Dollars,'' and it included a
    video portraying investment scheme that actually targets older
    Americans.
        This past February, in February 2005, we teamed up with the
    Postal Service consumer advocate and other Federal, State, and
    local consumer protection agencies, and launched a campaign to
    inform consumers how to avoid fraudulent work-at-home schemes.
    A multimedia approach conveyed the message with ads placed in
    newspapers and magazines reaching over 45 million readers.
        Last month, the Inspection Service and the Direct Marketing
    Association announced a nationwide consumer education
    initiative to educate Americans on how to avoid being scammed
    by the fraudulent sweepstakes like you just saw. In August, a
    foreign lottery campaign is planned to protect the public from
    those scams that take the money with the purchase of
    ``tickets'' and then charge a fee to collect the fictional
    winnings.
        Americans trust the Postal Service and the mail. Seniors
    have relied on this mail system their entire lives for their
    financial and their personal business. The Inspection Service
    is totally committed to continue its work of ensuring that the
    mails are secure and not used for criminal and fraudulent
    purposes. We will continue to be vigilant for those fraud
    schemes that target our senior citizens.
        In closing, Mr. Chairman, I would like to extend an
    invitation to you and the committee to join us in a National
    Fraud Prevention Campaign that we are planning to kick off
    during Consumer Protection Week in February 2006. This will
    focus specifically on educating senior citizens about the
    various fraud schemes that target their age group.
        That concludes my remarks. Thank you.
        [The prepared statement of Mr. Hill follows:]

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        The Chairman. Thank you both so very much.
        Zane Hill, is this a public service video? Is it shown on
    the airwaves? Where is it shown if not on television?
        Mr. Hill. We have sent it to target groups, and we have
    used it with some video news releases, but we have not done a
    public service campaign with it, Senator.
        The Chairman. It is very good, and it seems to me that
    there are probably some television programs where a public
    service announcement like that would be very, very effective.
        Just a question and a comment as an observation. I have
    seen some of your educational materials. They seem to me
    excellent. Do you do any research testing their effectiveness?
    Do you have a sense are you reaching consumers? Is it getting
    through how they can protect themselves?
        Ms. Greisman. We do an enormous amount of internal testing
    before we disseminate any sort of consumer----
        The Chairman. Do focus groups and----
        Ms. Greisman. Probably not quite on that level, but we do
    have an Office of Consumer and Business Education, which is
    staffed with people who have enormous expertise on how to reach
    a broad range of consumers and also how to communicate
    information in a way that is most likely to be received. We
    certainly have done copy testing on occasion when we think it
    is warranted.
        The Chairman. Lois, I owe you an apology. I think I
    mispronounced your name. It is Greisman, right?
        Ms. Greisman. That is correct. No problem.
        The Chairman. I apologize for that.
        A question about restitution to victims. When you identify
    them and you get a conviction or apprehend someone, do you ever
    retrieve their money?
        Ms. Greisman. I will start. If at all possible, we do, and
    the best key to enable us to do that is to be able to seize
    assets at the outset when we are dealing with criminals, people
    engaged in fraud. We, of course, are a civil law enforcement
    agency. If we are able to obtain ex parte relief and freeze
    their assets before they hide it, send it abroad, or do
    whatever they will with it, we are most likely to be able to
    preserve assets and then provide it to consumers in the form of
    redress at the end of the day.
        The Chairman. You have enforcement powers, but you do not
    have police powers in the same sense as the Justice Department.
    Do you work with them, the FBI?
        Ms. Greisman. We work very closely with them, as we do with
    Postal Inspection Service, FBI----
        The Chairman. Attorneys General in the States?
        Ms. Greisman. Attorneys General, U.S. Attorney's Offices.
    We have found that partnering our civil enforcement with
    criminal enforcement is indispensable, and that is where we get
    the main deterrent effect.
        The Chairman. Are there any Sentencing Guidelines for elder
    crimes?
        Ms. Greisman. I would have to defer to my colleague on the
    criminal side.
        Mr. Hill. Yes, Senator. I know there are some in terms of
    vulnerable victims, in terms of the fraud guidelines that talk
    about where the scheme targets individuals, I think, over the
    age of 55 or where you have multiple targets of a fraud scheme.
        The Chairman. These are Federal Sentencing Guidelines?
        Mr. Hill. Yes, sir.
        The Chairman. Lois, I think in your testimony you spoke of
    the schemes that come from across our borders--Canada, you did
    not mention Mexico. Are there some from that southern border as
    well?
        Ms. Greisman. Certainly we have seen cross-border fraud
    from many countries throughout the world. It is not limited to
    Mexico or to Canada.
        The Chairman. Say it is Mexico or Canada or anywhere else,
    what do other nations do in terms of coordinating with you and
    stopping it as it might emanate from their countries? Do they
    wait until their people are victimized, or do they work well
    with you, particularly our closest neighbors with whom we have
    the greatest commercial relationships?
        Ms. Greisman. We have an enormous history of collaborative
    efforts with our Canadian counterparts, and increasingly so
    with our Mexican counterparts. We have a lot of project
    initiatives in the pipeline with Canadian law enforcement, but
    it can be difficult, and part of what the FTC has sought in
    order to better enhance our ability to deal with cross-border
    fraud is the introduction and passage of the U.S. Safe Web Act.
    We think that would provide us with additional tools to
    effectively combat cross-border fraud.
        The Chairman. So as not to be blaming it on Canada, are
    there U.S. fraud schemes that victimize Canadians?
        Ms. Greisman. Absolutely. There is no question about it. In
    fact, we receive a lot of complaint data from what is called
    Canada's Phone Busters, and most certainly those involve some
    Canadian citizens complaining against U.S. companies.
        The Chairman. You feel like the relationship between
    nations on these issues is seamless and effective?
        Ms. Greisman. Very much so.
        The Chairman. That is very good to hear.
        What about recidivism rates? Someone you find, apprehend,
    in some cases, I am sure, imprisoned, when they come out do you
    get a lot of repeat offenders? What do you find, Zane?
        Mr. Hill. Yes, Senator, we do. There are more scams than we
    can possibly count and these people are very creative. The old
    saying ``There is a sucker born every minute,'' then they take
    advantage of that, and they will just, you know, when
    prosecuted, when sentenced, then they will come out and they
    will look for other creative ways to dupe American citizens out
    of their money.
        To your other question about cross-border type work,
    unfortunately--the good thing about the information age and all
    these new means of communicating is this is really good. The
    bad thing is this type of fraud becomes very global, and these
    operators can set up in any number of countries, some of which
    we have not yet had the opportunity to create that good
    partnership relationship like we have in other countries where
    we have actually worked with them to combat this. So you have
    to go to where the schemes are originating and where the
    operators are residing. That is where you have to go to seize
    the assets to do all those things to shut them down.
        The Chairman. Is there any place particularly in the world
    that seems to have a concentration of it? Or is it just
    pervasive?
        Mr. Hill. Well, I think if you were to ask us that, I think
    probably parts of Eastern Europe. You know, we have seen an
    increase in the number of operators out of there, but, you
    know, the way telecommunications can be routed and switched and
    so on and so forth, sometimes even the place where you think
    they are might not be where they are actually working from.
        Ms. Greisman. If I may?
        The Chairman. Yes.
        Ms. Greisman. When a consumer complains to us, the consumer
    knows only what the company may have told him about where the
    compared is located. So, for example, a company can certainly
    say, yes, I am in the U.S. and there is a U.S. drop box, but
    it, in fact, maybe in Eastern Europe or in Canada or elsewhere.
        The Chairman. It is appalling, but I appreciate your
    forthcoming answers.
        Senator Kohl.
        Senator Kohl. Ms. Greisman, your report indicates a general
    upward trend in consumer fraud and identity theft complaints
    from consumers of 50 and over. Aside from an obvious increase
    in scams, is this also due to an increase in awareness and,
    therefore, reporting? Are seniors becoming more familiar about
    whom to turn to?
        Ms. Greisman. Yes, we think that is absolutely right. Each
    year that we have better enabled consumers to contact us, we
    have seen a substantial increase in the number of complaints,
    both on the fraud and identity theft side.
        Senator Kohl. So that the upside in numbers clearly does
    indicate a problem, but it is not apples and apples. It is that
    more people are familiar with what is happening and, therefore,
    are reporting what is happening.
        Ms. Greisman. That is correct. It does not tell you
    anything about the actual incidence of fraud or identity theft
    across the country, which is why we use surveys to get at that.
        Senator Kohl. All right. As I understand it, the complaints
    from consumers that you receive are all reported by victims
    themselves. We have seen that there is much stigma associated
    with being victimized and, therefore, many crimes go
    unreported. Is there a way to extrapolate from these numbers
    the actual number of seniors who are being defrauded?
        Ms. Greisman. I am afraid I do not think we can do that at
    this point. We would have to look at our fraud survey and
    techniques used in conducting that survey to see if you could
    determine the actual incidence impacting the elderly.
        Senator Kohl. Mr. Hill, in your testimony, you describe how
    raids of fraudulent telemarketers' places of business turned up
    files containing very personal information about their victims,
    such as spouse and children's names, their health conditions,
    and their travel histories. How is such information being
    distilled?
        Mr. Hill. Senator, you have people in the business of
    gathering personal information about American citizens, and
    this is what their job is, any number of open source public
    records they go to. They have very aggressive research groups
    that gather this information for them, and then they compile it
    in lists, basically customer lists that they use. It is not a
    unique situation for the fraud operators. It is done in a lot
    of marketing strategies for consumer marketing campaigns.
    Unfortunately, the unscrupulous operators use those same types
    of lists to then victimize the seniors as a target audience
    that they know that they can go after and that they would be
    very susceptible to those types of scams.
        Senator Kohl. All right. I understand that the Postal
    Inspection Service has developed a series of consumer DVDs,
    education DVDs. How are these being disseminated to seniors? Do
    you have any feedback on how they are being received and what
    kind of impact these DVDs are having?
        Mr. Hill. To another question about a focus group, we have
    done focus groups with seniors on some of our DVDs, and they
    have been very positively received. They think it tells the
    right message in the right way so that seniors will understand
    what things to be aware of. We are going to do more of this
    with the other public awareness campaigns that we do to make
    sure that the message that we put together is, in fact,
    reaching the target audience with the things they need to do to
    protect themselves.
        Senator Kohl. Thank you.
        Mr. Chairman, thank you.
        The Chairman. Thank you, Senator Kohl.
        Senator Talent?
        Senator Talent. Thank you, Mr. Chairman.
        Mr. Hill, I notice in your testimony on page 8, you present
    five questions people ought to ask themselves if they are
    contacted or they see something on the Internet. I was actually
    going to ask about that. I can remember on a number of
    occasions seeing public service announcements actually from the
    post office explaining what to do if people want you to send
    money up front or something. Are you making an effort to get
    out this information about key questions to ask regarding
    potential transactions or deals like this?
        Mr. Hill. Yes, Senator, we are. We are going to continue to
    really focus with these types of questions. As the scams
    change, then these questions will also change. But basically
    the one that you pointed out, when you have to give money up
    front to get something that you have won, that is just a red
    flag automatically.
        So these are the things that we will continue to do. As
    these scams continue to evolve, we will continue to pull out
    these key questions and build those into each of these public
    awareness campaigns that we are doing.
        Senator Talent. This is very frightening to me, Mr.
    Chairman, because I can easily see a lot of people, not just
    seniors asked to confirm something and providing some financial
    information and then, bang, their whole savings are just gone.
    I hope we can come up with some way for really getting this
    word out in a way that people can understand.
        Thank you, Mr. Hill. Thank you, Mr. Chairman.
        The Chairman. I have a few questions on the second round,
    so if any of my colleagues have additional questions, we will
    go to them.
        Back to the question of public service announcements, to
    either FTC or Postal Inspection, do you have the authority to
    get these on the air or do you have the funding necessary to
    get these on the air? Because it does seem to me that that
    could be perhaps quite effective if we could get them more
    broadly distributed, these messages that may be produced in the
    form of 30-second television ads. Do you have funding or need
    authority that Congress can provide?
        Ms. Greisman. We do conduct an enormous number and
    different types of consumer educational campaigns. To the best
    of my knowledge, we have not done video news releases, which is
    not to say it is not something we would not think about. But we
    have reached, we think, an enormous audience through our print
    and online materials as well as through some radio I know we
    have done. In fact, in the near future we will be doing an
    enormous outreach campaign focusing on identity theft as part
    of the FACT Act amendments.
        The Chairman. I would sure encourage you to think about
    what you need from Congress to better broadcast the materials
    that I think are excellent that you have produced, because I
    think there is an education curve out there that could really
    put a dent in this that maybe we can more effectively
    disseminate.
        I want to ask you about methamphetamines, not that you have
    anything to do with it, but my State of Oregon--and I suspect
    it is true of other States increasingly, tragically--just has a
    plague of methamphetamines. In fact, in Washington County, OR,
    over 90 percent of identity theft cases last year were
    connected to meth trafficking. The U.S. Attorney's Office in
    Eugene, OR, says the statistics are similar for what they
    regard as routine ID theft cases such as shoulder surfing,
    dumpster diving, and mailbox theft.
        Can you both elaborate on what, if any, experience your
    respective agencies have with this component to elder abuse?
        Ms. Greisman. I am not aware of a specific component with
    respect to seniors. Certainly we are well aware and the law
    enforcement community is well aware of the link between
    identity theft and methamphetamines, and what we have seen is
    that either people who are addicted or people who are
    trafficking it are using identity theft as a quick way to get
    quick cash to fund the labs. Part of what we are doing in
    response to that is ensuring that as many complaints as
    possible get into the Consumer Sentinel Network because that is
    accessible to 1,300 law enforcement agencies throughout the
    U.S., Canada, and Australia, and we think that will enable them
    to connect dots to locate thieves in a way that they do not
    otherwise have available.
        Mr. Hill. Senator, from our perspective, in the last
    probably 8 years or so, whenever you have seen that increase in
    meth usage and a meth problem in a community, you see these
    types of very low-level white-collar type crimes that are going
    on, the identity theft, trying to--purse snatching, vehicle
    break-ins to get purses or any type of personal information.
    You referenced other theft of mail. All of those things go hand
    in hand with that type of crime that the methamphetamine users
    seem to gravitate to. For them, it is not a very high-risk
    crime. It is something that they can do fairly anonymously if
    they can get the information. They do not have to confront
    someone. They do not have to brandish a weapon at them. They
    can do a great deal of damage to a community with those types
    of what we call probably low-tech white-collar crimes in terms
    of stealing that information.
        The Chairman. I am sure you are very much aware that Health
    and Human Services is in the process of implementing a Medicare
    Part D program, a prescription drug benefit for Medicare
    patients. Obviously, we are talking about people who are
    elderly. I suspect that as we speak there are many scams being
    developed trying to springboard off of Medicare Part D. Are my
    suspicions well founded? Are you starting to see prescription
    drug fraud schemes being developed?
        Ms. Greisman. Well, sir, over the years we have,
    unfortunately, seen no shortage of frauds involving various
    drugs, various dietary supplements, both in terms of the claims
    promised about what they can do for you, but also in terms of
    their availability. In fact, one of the settlements referred to
    in the Commission's testimony involves a scheme in which people
    allegedly were selling a Medicare program.
        What we have done, because we are anticipating a possible
    surge in such types of fraud, is talk to our colleagues over at
    HHS to try to find the best way to ensure consumers who are
    defrauded or who think they are defrauded know where to file a
    complaint and can access information that will ensure that they
    can differentiate between, distinguish between what is
    fraudulent and what is real.
        The Chairman. I am glad to hear you are already working
    with HHS because I suspect that scenario, as we implement this
    prescription drug benefit, that there is going to be a world of
    new opportunities for people who would commit these frauds.
        Senator Kohl, do you have any additional questions?
        Senator Kohl. No.
        The Chairman. Senator Talent.
        Senator Talent. No.
        The Chairman. We have just been joined by the Senator from
    Delaware. Do you have an opening statement or a question of
    these witnesses?
        Senator Carper. Not an official statement, but just
    something I would like to say, and then a question, if I may.
    As I walked through the room, I heard part of my question being
    asked, so maybe the rest of it has been asked as well.
        In our State, Delaware, we had about 40, 45 different drug
    discount cards that people could apply for. It was very
    confusing. I was thinking about trying to explain things so
    that my mother, who just passed away, could have understood
    them and trying to couch them in those terms. It is hard enough
    for folks the age of my mother or my aunt and uncle to
    understand the benefit that is being offered to them, and it is
    all the more difficult when there are folks out there that are
    trying to defraud them.
        We saw a fair amount of that fraud not so much in Delaware
    during the last year or so with the drug discount card, but
    what lessons have we learned from the fraud that grew up around
    the drug discount card that might enable us to reduce the
    incidence of fraud with respect to the next step, the
    implementation of the Part D benefit?
        Mr. Hill. I will just speak from the U.S. Postal Inspection
    Service standpoint. I am not aware of us seeing a real increase
    in the numbers of investigations that we have done of that
    nature. I could be wrong, but I do not know if we have really
    looked at that to the level of concern that the committee has
    expressed, and we will do so to see what kind of numbers. But
    obviously you are right, Senator, anytime that someone is
    misrepresenting what service they can provide to those card
    users, then there is a strong possibility that they could be
    deprived of services needed. So that will be something that we
    will most certainly take a look at.
        Ms. Greisman. I will add just briefly, that the importance
    of education can never be underestimated, and I think the point
    you are making is critical, which is that it is important to
    communicate in a way that people understand what you are saying
    and can use that information. That is something we spent a lot
    of time and energy ensuring that we get right, and we are
    constantly re-evaluating it. The prescription drug world is
    certainly a challenge, but it is one that we think we can deal
    with, working with HHS.
        Senator Carper. On the one hand, it is hard enough for
    folks the age of our parents and grandparents to figure out do
    I want to use this benefit, the Part D benefit. Do I want to
    use it? Do I know enough to understand it to make a right
    decision? Is the person that I am talking to on the phone
    someone who is there to help me or someone who is there to take
    my money and to defraud me?
        My mom used to live down in Florida just outside of
    Clearwater for a number of years, until my sister and I moved
    her up to Kentucky in the last years of her life. I remember
    the last few years my mom was there--my dad had passed away--my
    mom put a roof on their house that did not really need one. My
    mom built an extension to the house that I am sure was not
    really needed. She was living there by herself. I remember the
    time when my mom bought a vacuum cleaner, and she paid more for
    that vacuum cleaner than I paid for my first car or two that I
    bought. It is a good vacuum cleaner, but--and it should have
    been for what she paid for it, for as long as she paid for it.
        But, on the one hand, somebody tried to sell her once a
    long-term nursing home plan, and she bought it. My sister and I
    had no idea that someone had tried to sell her that kind of
    nursing home plan, but she bought it. When the time came for us
    to move her and all of her earthly goods from Florida up to
    Kentucky, my sister came across this long-term nursing home
    plan that my mom had bought for a relatively small amount of
    money and found out that it was worth 2 years of paying for her
    to stay in a private nursing home, and in that case--so we were
    not all that happy about the vacuum cleaner and the roof on the
    house and some other things, but we were glad that my mom had
    the good sense, the presence of mind to take out that long-term
    care plan, which did a lot of good for her and for us.
        Thanks very much.
        The Chairman. Thank you, Senator Carper.
        Lois and Zane, thank you both very much for your presence
    and testimony today and your public service. We are grateful to
    you and your agencies for what you are doing for America's
    senior citizens.
        The Chairman. We will now call up our second panel that
    will consist of four individuals: Dr. Anthony Pratkanis, a
    professor of psychology at the University of California at
    Santa Cruz, serves as a member of the AARP multidisciplinary
    research team.
        He will be followed by Dr. Denise Park, who is the co-
    director of the National Institute on Aging Roybal Center for
    Healthy Minds at the University of Illinois, and she will be
    presenting the results of NIA-funded research illustrating the
    role of cognitive science in developing effective consumer
    education materials for older Americans.
        Then we will hear from Ms. Helen Marks Dicks, the director
    of the Elder Law Center, the Coalition of Wisconsin Aging
    Groups, and she will testify about the center's work in
    educating and empowering seniors to recognize, report, and
    combat scams and other fraudulent practices.
        Also, we are very pleased to welcome from my home State of
    Oregon Ms. Vicki Hersen. She is the director of Operations at
    Elders in Action. Ms. Hersen will testify about Elders in
    Action community education program which provides seminars and
    ombudsman counseling on many topics, including senior scams,
    fraud, and identity theft.
        Dr. Pratkanis, go right ahead.

        STATEMENT OF ANTHONY R. PRATKANIS, PH.D., PROFESSOR OF
    PSYCHOLOGY, UNIVERSITY OF CALIFORNIA AT SANTA CRUZ, SANTA CRUZ,
                                   CA

        Mr. Pratkanis. Chairman Smith, Ranking Member Kohl, and
    Senator Talent, every year Americans lose almost $100 billion
    in telemarketing, investment, and charity fraud. While this
    dollar figure is staggering, it does not capture the true costs
    of this crime. Fraud not only impoverishes victims financially,
    but it can also impoverish them emotionally and drive a wedge
    between victims and family members. Economic fraud crimes have
    societal consequences as well, resulting in a loss of trust
    that impacts the business community and erodes the very fabric
    of life in American society.
        But I want to report some good news in the right against
    economic fraud crimes.
        For the last 8 years, I have been a member of a team of
    researchers and fraud fighters consisting of myself, Doug
    Shadel, the state director of AARP in Washington State; Bridget
    Small, the director of Consumer Protection for AARP here in
    Washington, DC; and Melodye Kleinman, of WISE Senior Services,
    whose written testimony you received today.
        Our team has conducted surveys of victims, carried out
    experiments investigating the effectiveness of intervention
    strategies, developed educational materials, trained volunteers
    to fight this crime, and have warned over a quarter of a
    million potential victims personally about fraud crimes. As a
    result of our work, we have developed an understanding of the
    nature of the crime and some strategies for preventing it. I
    want to tell you four things that we have learned, and I want
    to discuss with you three opportunities or challenges that I
    think we will face in fighting this crime.
        First, we have learned that the weapon that is used in
    fraud crimes is social influence. No one knowingly gives their
    hard-earned cash to a con criminal. They think they are making
    an investment, winning a prize, providing for a charity, or
    some similar positive goal. The con criminal is a master at
    using one high-powered influence tactic after another to sell a
    deception. Given that the weapon in a fraud crime is an
    invisible one--social influence as opposed to a gun or a
    knife--there is a tendency by both victims and observers not to
    recognize economic fraud crime for what it really is--a crime.
        Recently, Doug Shadel and I analyzed over 250 undercover
    tapes used in fraud investigations. In these taps, law
    enforcement took over a victim's telephone line and then tape-
    recorded the con criminal's pitch. In listening to these tapes,
    we found that con criminals would play different roles--
    authorities, friends, even dependents--to create a platform of
    trust. They would then use many well-established social
    influence tactics to sell the crime. For the most part, these
    sales pitches are sweet and charming, although nonetheless
    deceptive and effective. However, at times it can also be
    abusive, frightening, and intimidating.
        Mr. Chairman, with your permission, I would like to play a
    portion of some of these tapes to illustrate the abusiveness
    that can occur in these crimes.
        The Chairman. Without objection.
        Mr. Pratkanis. The first selection is a montage of fraud
    pitches taken from two different undercover tapes. First you
    will hear two cons, Victoria and Sean, who are working together
    for a company that they call WMT. The company claims to be
    offering credit card protection. In reality, they are
    attempting to get the victim--in this case, Helen, who is
    played by a seasoned investigator--to make what is known as a
    verification, to give her name and other personal information
    over the phone, which they will then record and then use
    subsequently to withdraw money from Helen's account.
        In another scam, which you will also hear interspersed
    between these two, you will hear from Robert, who has told
    Ardelle, a real victim in this case that is being tape-recorded
    as part of a law enforcement investigation, that Ardelle has
    won a prize and needs to send money to claim her prize. Ardelle
    has been a repeat victim and now is out of money, and thus
    Robert is making one last attempt to steal whatever he can from
    her. [Taped played.]
        Mr. Chairman, with your permission, I would like to play a
    second portion of the section of our tapes that will give you
    an additional feel for the abuse. This time we will look at a
    little more detail about that WMT company. This was a call
    recorded in March 2003, and again, WMT is trying to get a
    verification from the victim. They have told them they are
    credit card protection, but what they are really trying to do
    is get a verification where the victim reads their personal
    identification number over the phone, which they tape-record
    and then use to withdraw from their account.
        Senator Talent. This is a law enforcement officer on the
    other end?
        Mr. Pratkanis. Yes, Senator. The first one was a victim.
    [Pause.]
        The Chairman. Maybe they got away.
        Mr. Pratkanis. It is in the written testimony as well, so
    we can move on if you would like.
        The Chairman. Why don't we do that? We will put it in the
    written record.
        Mr. Pratkanis. Thank you, Mr. Chairman.
        The Chairman. I understand Senator Talent had a question
    for you before he had to leave, and if you want to ask that,
    Senator?
        Senator Talent. Actually, I just want to clarify about the
    tape, and I got the answer.
        The Chairman. OK. Thank you, Senator Talent.
        Go right ahead, Doctor.
        Mr. Pratkanis. Mr. Chairman, a second thing that we have
    learned is just about anyone can fall prey to this crime. It
    impacts a large cross-section of our society, as Senator Talent
    said in his opening remarks. Con criminals go where the money
    is, and thus, older Americans with their nest eggs are a prime
    target for this crime. The stereotype of a frail or lonely
    victim does not stand up in our surveys of victims. While some
    victims are indeed lonely, others are quite active in their
    communities and can be leaders in their communities.
        Indeed, what we find is that con criminals profile their
    victims, as Mr. Hill said earlier, and they profile their
    psychological and other characteristics to find their Achilles'
    heel. We all probably have one. They find that Achilles' heel
    to construct the exact pitch that is likely to be most
    effective with each victim.
        For example, in one of our surveys, we found that victims
    of lottery fraud, a crime which emphasizes luck, believe that
    the world controls them, a psychological trait known as
    external locus of control; whereas, investment fraud victims--
    and this crime emphasizes a mastery of one's fate--they believe
    that they control the world, or a trait known as internal locus
    of control. In other words, the con criminal was pitching the
    exact scam to take advantage of the person's psychological
    characteristics.
        The third thing that we have learned is we have identified
    effective strategies for preventing this crime. In her written
    testimony, Melodye Kleinman described the reverse boiler room
    approach of WISE Senior Center. At WISE, senior volunteers
    contact potential victims with a warning message. The
    volunteers call potential victims whose names appear on
    criminal call or mooch lists that have been recently seized by
    the FBI. These can be quite active lists. It is not uncommon
    for us to call people and find out that they just sent in some
    money to a con criminal.
        Our volunteers then call and talk with these potential
    victims. They explain the nature of the crime, and then they
    help them develop their own strategies for preventing the
    crime. In a series of experiments, we tested the effectiveness
    of this intervention. We first had our volunteers call the
    victim with a prevention message, and then a few days later
    professional telemarketers attempted to take the victim in a
    simulated scam. We found that our interventions were effective
    in reducing victimization rates by about 50 percent. In other
    words, peer counseling is an effective tool in our fight
    against economic fraud crimes.
        Finally, as a result of our research and work with victims,
    we have identified components of a prevention message that are
    most effective. Successful prevention messages are ones that
    provide the potential victim with specific warnings about the
    crime and, most importantly, coping strategies for dealing with
    the crime that build a sense of self-efficacy, a feeling that
    ``I can take charge of the situation and hang up'' on the
    criminal. We encourage everyone to develop their plan for
    getting off the phone and have it ready to go when the need
    arises. On the other hand, our research has found that some
    messages that increase fear and create a defensiveness not only
    do not work but oftentimes boomerang, and in one study actually
    increased victimization rates slightly.
        Our research suggests three opportunities and challenges
    for those interested in preventing this crime.
        First, it is important to remember that economic fraud is a
    crime. There is a tendency to blame the victim in this crime
    and to believe that ``there must be something about them'' that
    led to victimization. Instead, our research shows the power of
    the fraud criminal's weapon of influence. Victim blaming is
    harmful to victims and hinders law enforcement's ability to
    obtain accurate and timely information about this crime. The
    victim of economic fraud should be included in any Victim's
    Bill of Rights. Sentencing for economic fraud crime should
    match the magnitude of the crime and not the charm of the con.
    We need continuing Federal efforts in investigating and
    enforcing these laws.
        Second, we now have the tools, knowledge, and strategies
    which have been proven effective in preventing economic fraud.
    This information needs to be disseminated to fraud fighters
    everywhere. Doug Shadel, in collaboration with Washington State
    Attorney General McKenna, has trained over 2,500 volunteer
    fraud fighters since October 2003 who have in turn educate
    close to 100,000 people in their communities about fraud. This
    fall they will begin a series of peer counseling events to
    reach those whose names have been stolen by identity thieves.
    We need more of this sort of intervention. I would like to see
    the tools for effectively dealing with this crime in the hands
    of every victim's advocate in local and State prosecutor's
    offices, the efforts of Washington State duplicated in other
    areas, and the creation of regional centers to fight economic
    fraud patterned after the remarkably successful program at WISE
    Senior Center.
        Finally, we need research that focuses on the chronic
    victim, the 50 percent or so of victims that we did not
    successfully reach in our call center research. Our research
    shows that the chronic, repeat victims find themselves in a
    rationalization trap of being confronted with two discrepant
    thoughts: ``I am a good and capable person,'' on the one hand,
    but yet, ``I just sent my hard-earned money to a scammer.'' In
    such a situation, it is difficult to admit that one has been
    taken in a fraud without damaging self-esteem, and thus
    defensiveness is common. We are currently investigating
    strategies for resolving this rationalization trap in the hopes
    of finding effective interventions for use with the chronic
    victim.
        Chairman Smith and Ranking Member Kohl, this concludes my
    testimony. I thank you for the opportunity to inform you about
    our research, and I thank you and each of the members of your
    committee for the leadership you are taking in fighting this
    crime.
        Thank you, sir.
        [The prepared statement of Mr. Pratkanis follows:]

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        The Chairman. Thank you, Doctor. That was wonderful
    testimony, very helpful to learn from.
        Our next announced witness is Dr. Denise Park. Dr. Park?

       STATEMENT OF DENISE C. PARK, PH.D., CO-DIRECTOR, NATIONAL
    INSTITUTE ON AGING ROYBAL CENTER FOR HEALTHY MINDS, UNIVERSITY
                   OF ILLINOIS, URBANA-CHAMPAIGN, IL

        Ms. Park. Thank you. Good afternoon, Chairman Smith,
    Senator Kohl, and other members. My name is Denise Park. I am a
    cognitive neuroscientist and professor at the Beckman
    Institute, which is part of the University of Illinois in
    Urbana-Champaign. I direct the Roybal Center for Healthy Minds
    at the University of Illinois, a center funded by the National
    Institute on Aging that is designed to take the results of
    basic laboratory research on aging and determine how these
    results can be used to improve function in older adults in
    their everyday lives. I have been involved with the NIH by just
    completing a stint Chairing an NIH Review Panel recently, and I
    also just completed a term on the Board of Directors of the
    American Psychological Society.
        Thank you for inviting me today. My research for the past
    two decades has focused on the aging mind. Today, I would like
    to alert you to how changes in cognitive function with age make
    older adults particularly susceptible to being victimized by
    charlatans who exploit certain aspects of the aging cognitive
    system.
        How are we doing on the visual aids here? OK, great.
        Here is a figure based on data collected from my laboratory
    that has been published in scientific journals as well as USA
    Today and Newsweek. I call this figure the ``Aging Mind''
    slide. It represents data collected on many different cognitive
    tests from adults aged 20 to 90 who were selected from a group
    of exceptionally able and healthy older adults. What you will
    see in this figure is the focus of my first important take-away
    point. Basic lab research demonstrates very clearly that as we
    age, beginning in our 20's, like many other systems in the
    body, our cognitive system shows signs of gradual
    deterioration. With age, we become slower at processing
    information; our memory becomes somewhat less effective; and
    our ability to take in a large quantity of information at one
    time and reason about it decreases. At the same time, these
    declines are not as important for function in everyday life as
    they might appear, because with age, as this figure shows,
    knowledge also increases, conferring a buffer against the
    impact of cognitive aging. Nevertheless, we do become
    increasingly ``cognitively frail'' with age, and this frailty
    has the greatest impact when we cannot rely on our knowledge or
    experience to help us out. So when older adults are
    unexpectedly faced with offers to buy things or have repairs
    done, they have less ability than younger adults to process all
    aspects of the message that they are receiving. This can result
    in them attending to the most attractive parts of the message
    or the simplest part of the message and agreeing to purchase
    things that they neither want nor need, or worse yet, signing
    contracts for which they never receive any services or
    contracts that they do not understand.
        A second take-away point that will give you further insight
    into why older adults are more easily exploited by consumer
    scams is the following: There is conclusive evidence that older
    adults have a bias toward the processing of positive
    information. Studies conducted by Laura Carstensen and her
    colleagues at Stanford University suggest that with age, we
    learn to ignore negative information and direct more of our
    attention and limited cognitive resources toward positive
    information. This is generally good news, suggesting the
    resilience that characterizes so many of our elderly citizens.
    But at the same time, this tendency to process positive
    information at the expense of negative can make older adults
    particularly vulnerable to unscrupulous characters.
        Research in my lab conducted with Oscar Ybarra has
    demonstrated the following: We presented young and older adults
    with both positive and negative information about an individual
    and then tested their memory for the traits we used to describe
    the individuals. Older adults tended to recall more positive
    traits and less negative traits, whereas young adults were more
    balanced between positive and negative information. These
    results suggest that when older adults meet a charming
    charlatan, they are going to be biased toward processing the
    positive information about the individual--his niceness,
    attractiveness, and warm toward them--and be less likely to
    note the inconsistency of his story or tendency to gloss over
    specifics, which would make him seem untrustworthy to a younger
    adult. This problem is exacerbated by the somewhat more limited
    cognitive abilities that occur with age that, again, result in
    increased vulnerability to exploitation. The types of effects I
    am describing will be particularly pronounced for our oldest
    citizens and for those with less experience, that is, less
    knowledge, with making financial decisions. So, for example, a
    new widow over age 75 might be particularly vulnerable to
    exploitation.
        The third point that I want to make is that with age, we
    tend to remember less explicit detail about events and more of
    the gist of what we hear. With age, individuals are
    particularly poor at remembering the details or context in
    which they learned something. So the point about gist memory
    will become particularly important when you consider my fourth
    point, and that is this: Information that feels familiar to an
    individual seems like it must be true. This is called the
    ``illusion of truth effect.'' Knowing that older adults
    remembered gist over detail, and that familiar information
    feels true, my colleagues Ian Skurnik, Norbert Schwarz, Carolyn
    Yoon, and I set up an experiment that was designed to
    demonstrate that information that individuals believe to be
    false at the time they learn it will later seem true. Here is
    what we did.
        We had older adults--aged 60 and over--and young adults--
    aged 18 to 25--come into our lab, and we presented them with a
    series of statements about health and told them whether the
    statements were true or false. For example, they would see
    statements like ``Most cold medicines cause the eye's pupils to
    dilate,'' or ``DHEA supplements can lead to liver damage, even
    when taken briefly.'' Some of the statements they saw only once
    and some they saw three times. Thus, all participants studied
    some statements that they were told three times were false.
    Now, remember that older adults tend to remember gist but not
    the details of what they see or hear. Remember that familiar
    information seems true. So what did we predict? We predicted
    that people would be more familiar with the statements that
    they heard three times were false than the statements that they
    heard one time were false. We also expected that older adults,
    because they forget details, would not remember whether the
    statements were true or false.
        So 3 days later, when we brought our participants back to
    our lab, what did we find? We showed people the statements they
    studied earlier as well as some new ones, and we asked people
    to judge whether the statements were true, false, or new. What
    we found was very surprising on the surface, but also exactly
    what we predicted. We found that old, but not young, adults
    were more likely to call a statement true that they had been
    told was false three times, compared to a statement they heard
    was false only once. So the more often participants had been
    told a medical statement was false, the more likely 3 days
    later they were to believe that this statement was true. Why is
    this? It is because the statements they heard were false
    multiple times felt familiar, and information that feels
    familiar seems true. So young adults did not show these effects
    because they could remember the explicit details about what
    they had studied.
        So these findings explain how pernicious the effects of
    false claims can be for older adults. An older adult might not
    believe that ``shark cartilage cures arthritis'' if they read
    it as a headline in a tabloid at the grocery store checkout.
    But later, when they encounter the shark cartilage in the
    store, they might remember that they heard somewhere that it
    was a cure for arthritis and decide to purchase it, not
    remembering that they disbelieved the information when they
    initially read it. These findings provide insight again into
    not only how older adults might be exploited, but also provide
    guidelines for providing warnings to older adults. When
    presenting information to older adults as a warning, it is very
    important to present information clearly and in a positive
    way--for example, ``Do this,'' rather than ``Never do this''--
    if we want older adults to accurately remember it. Here is an
    example of a way not to present information to older adults
    taken from an actual pamphlet about living trusts.
        Here is the claim: A living trust--this was taken from an
    actual pamphlet. A living trust will preserve your legacy to
    loved ones by helping you avoid probate costs and estate taxes.
    Then it goes on to say: But here is the truth. Most people do
    not need to worry about probate or estate taxes. Most living
    trusts are not designed to avoid estate taxes. There are many
    easier, cheaper ways to avoid probate than a living trust.
        Older adults, however, a few days later, if they read this,
    might only remember that they learned something about how
    living trusts are important for avoiding probate, and they
    think that they need one, even if they initially understood
    that living trusts are rarely needed to avoid probate.
        A better way to phrase this might be as follows: Living
    trusts are usually unnecessary and rarely save money for
    people. If you think a living trust is for you, get advice from
    an estate planning attorney.
        Presenting false claims about health or taxes to older
    adults and then explaining why they are wrong is a dangerous
    business for helping older adults avoid fraud.
        What I would like to do now is to critique several public
    service ads intended to educate older Americans about consumer
    fraud from the point of view of a cognitive psychologist. I
    will be pointing out some features that make the materials more
    easily comprehended and remembered by older adults and also
    presenting some examples that have some significant problems
    that will limit their effectiveness. As we look at these ads,
    keep in mind that designing materials for older adults can be
    particularly difficult due to the range of cognitive ability
    present in this population. There are, of course, a majority of
    older adults who are functioning at an extraordinarily high
    level and will be quite insulted by materials that are so
    simple that they appear to talk down to them. At the same time,
    there is a significant proportion of very old adults who are
    cognitively compromised and who may also have a limited social
    network, and these may be most susceptible to fraud. It can be
    quite a challenge to design materials that speak to both
    groups. Nevertheless, I will try to show you some materials
    that succeed for both groups and others that are problematic in
    their design.
        First I will show you some examples of problems. The first
    example here is material about Alzheimer's disease designed by
    a nonprofit Alzheimer's support organization. This particular
    brochure illustrates the point I just made. Remember that I
    mentioned that older adults tend to remember the gist of what
    they read rather than details and that information that is
    believed to be false at the time they read it may feel true
    later on. So when this information is presented as a set of
    itemized myths, there is a good chance that the information
    will later be remembered as truth. For example, an older adult
    reads the statement, ``MYTH: There Is No Hope for an
    Alzheimer's Person.'' At the time he or she reads it, they
    understand the statement is false. Days later, however, all the
    individual remembers is that he or she once read somewhere that
    there was no hope for people with Alzheimer's, completely
    forgetting the context in which it was read. Had the
    information been presented in a straightforward and positive
    way--``FACT: There are things that can be done to help people
    with Alzheimer's''--such a misunderstanding could have been
    avoided.
        The next example is a consumer fraud fact sheet published
    by the Federal Trade Commission that warns against ``phishing''
    scams, a type of e-mail scam to which older adults, due to more
    limited experience with the Internet, may be especially
    vulnerable. The problem with this ad is that those individuals
    most likely to be taken in by a phishing scam are probably
    going to think it has something to do with the sale of seafood
    that does not exist. So the people who most need to read this
    article would be likely to pass it by when they encountered
    this brochure because they would not know what a phishing scam
    is and that it would have any importance to their everyday
    life. Perhaps a better headline would be, ``Have you been
    getting e-mail requests to update financial records or to help
    secure funds for someone in another country? It is a scam.''
    Then the next line might read, ``How Not to Get Hooked by a
    Phishing Scam.''
        The next excerpt is from a pamphlet on Medicare/Medicaid
    fraud put out by the Department of HHS and the Administration
    on Aging, and it is another example of helpful information
    being presented in a difficult and inaccessible format. Here we
    see once again that the main title, ``Be Informed, Be Aware, Be
    Involved,'' does not convey any useful information about what
    this pamphlet is actually about. The section headings also give
    no sense of what the topic of the pamphlet is. It is only upon
    careful scrutiny that one is able to notice that it is about
    health care and Medicare fraud. Finally, in small print, it
    indicates that if one suspects that fraudulent charges have
    been made to Medicare on their bill, one should call the number
    on the back of the pamphlet. But actually there is no number
    provided. The title of this pamphlet might read instead,
    ``Check Your Medical Bills. Be Alert to Medicare Overcharges
    and Medicare Fraud.'' Ms. Park. The next advertisement
    developed by the Department of HHS, the American Hospital
    Association, and the AMA is a good example of a well-crafted
    message that is easily accessible to older adults at all levels
    of cognitive function. The text is simple and succinct. The
    title and headings are eye-catching and easy to understand. It
    is possible to gather the gist of the message simply by
    glancing at the bold text alone. However, anyone who is
    interested in more detail can chose to read the small print as
    well.
        The pictures, while adding to the overall attractiveness of
    the ad, also serve to reinforce the main points and make them
    more memorable and easier to process.
        The Chairman. As you have evaluated these, Dr. Park, how
    much of the Government's information is good and how much is
    bad?
        Ms. Park. That is an interesting question. Your Committee
    sent me 10 or 15 pamphlets of this sort, and I selected 6
    without any difficulty to critique, and, you know, I would
    guess at least--this is a guess. Of the materials I was sent, I
    would guess 25 percent had serious problems. I didn't have to
    look hard to find these examples, and there were many more in
    the materials that were sent to me.
        The Chairman. You mind if we give them your number?
        Ms. Park. I might mind. No, I think that actually that's my
    closing comment, and maybe I should get to that.
        Very quickly, this is another example of a good add. It is
    really clear what this ad is about. Stop calling me. How to
    remove your name from marketing lists. Then you can see that
    there is clear headers, and you can look at what your
    particular problem is and get more information on the second
    page of the web site.
        This is a web page. Here is another one that is really very
    good. Nice integration of visual and verbal information. If you
    just bought something online about a medical device, you would
    be sure to look at this and sure to know that this is about how
    to be warned.
        I like that they showed the FDA as a clear and credible
    source that was very visible on this ad, and it is also easy to
    figure out how to get more information from this ad.
        So to conclude, I hope you all remember the following:
    normal aging is accompanied by declines in cognitive function
    that result in older adults remembering gist rather than
    details. Never present older adults with false statements as
    examples, because, later on, they will feel true to the older
    adult.
        Older adults have a bias to process positive information.
    This can lead to exploitation due to their tendency not to
    process negative information about shady characters.
        Finally, I would like to note that cognitive aging
    scientists can play an important role in designing effective
    and memorable materials for older adults that will help them be
    less vulnerable to fraud. The work I have presented today is
    only a small example of the help cognitive scientists can offer
    in designing effective materials for older adults to protect
    them against fraud, as well as to aid in designing materials
    that clarify information about taxes, forms, medical
    conditions, and Social Security.
        The research I presented today was supported by the
    National Institute on Aging, and is a good example of how basic
    laboratory research can result in important outcomes for
    understanding everyday behaviors. It has been an honor and a
    pleasure, Senator Smith and Senator Cole, to share with you the
    work conducted under the auspices of the NIA Roy Ball Center
    for Healthy Minds, and I would also like to thank your
    Committee staff for their support and the National Institute on
    Aging for the support of the research that contributed to this
    presentation. Thank you.
        [The prepared statement of Ms. Park follows:]

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        The Chairman. Dr. Park, it has been enormously helpful and
    insightful the academic approach you have taken. A question if
    I may.
        How sophisticated do you think the scam artists are? Do
    they know what you know in terms of positive messages and how
    to tell negative things in ways that will ultimately seem
    truthful to them?
        Ms. Park. I think that is a really good question. I think
    there are people who intuitively know how to defraud people and
    recognize that they need to present themselves as warm,
    charming--how to deal with lonely elders--and also are very
    good at, based on a few cues in a conversation as to what this
    person needs and wants to hear. So there is, you know, I would
    guess a really sophisticated con artist is a natural
    psychologist. He is informal. They also learn over time with
    what works and what doesn't work, and they will unconsciously
    learn things about what works that they can't even verbalize,
    but they may implicitly recognize what will be effective.
        The Chairman. Well, certainly this hearing and this
    Committee will be pursuing your suggestions on improving the
    materials and their effectiveness so that they are not wasting
    time, but actually making a difference. So.
        Ms. Park. OK. Thank you, Senator Smith.
        The Chairman. Thank you so very much. Helen Dicks is from
    Senator Kohl's State of Wisconsin and, we are very thankful for
    your presence and invite your testimony now.

      STATEMENT OF HELEN MARKS DICKS, ESQ., DIRECTOR , ELDER LAW
     CENTER OF THE COALITION OF WISCONSIN AGING GROUPS, MADISON, WI

        Ms. Dicks. Thank you. Good afternoon, Chairman Smith,
    Ranking Member Kohl, and members of the Special Committee on
    Aging. I appreciate this opportunity to testify.
        The Elder Law Center observes three types of financial
    exploitation of older Americans. Most easily recognized are the
    traditional fraudulent practices where a third party defrauds
    the senior and obtains their assets and their identities. The
    abusers are strangers to the seniors. This is the type that we
    have talked about the most today, and the type that we identify
    mostly as a consumer protection issue.
        The second issue that we deal with is the occurrence of
    waste, abuse, and other fraud within Medicare and other public
    benefit programs. With the introduction of a new and complex
    Medicare Prescription Drug Program this fall, marketing to
    seniors will reach a new, intense level.
        The CWAG Elder Law Center anticipates that scam artists
    will use this development to exploit seniors and people with
    disabilities who receive Medicare.
        Previously, you had asked what happened around the drug
    cards introduced last year as a transition before this benefit
    started. We had a lot of experience in Wisconsin with people
    charging applicants who apply for a public benefit. We had
    people pretending to be a Medicare approved card company,
    getting people's personal information, and then charging their
    credit cards to the tune of $299 for a card that was not a
    Medicare approved card. There were several organized scams
    around the discount cards.
        We presume that the same level of sophistication and greed
    will come out in the Part D marketing this fall.
        The third type of exploitation is the most common, the most
    under reported, and actually the most appalling type of elder
    abuse. It is the financial abuse of seniors by family members
    and other trusted people. These people use legal documents,
    such as Powers of Attorney, to drain seniors of their lifetime
    savings and assets. Trusted family members and professional
    advisors use estate planning as a means of gaining access to
    savings accounts, real estate, and other personal possessions.
        Seniors are reluctant to report these crimes simply because
    they involve family members. Law enforcement is often reluctant
    to get involved because they see this as a family issue.
        To address these concerns, the Elder Law Center has been
    using a fourfold approach.
        We provide consumer education on identifying and preventing
    financial elder abuse, benefit fraud, and other forms of
    exploitation. This education includes our publications, which I
    have provided to each Senate office.
        Additional consumer materials were given in my testimony
    packet.
        Since we anticipate major fraud activity around the new
    Medicare Drug Benefit, we have a section on our Part D web site
    www.wismedrx.org specifically dealing with fraud and a separate
    e-mail address to report fraud to us as people become aware of
    this type of activity.
        Two, we provide legal assistance and emergency
    representation for victims of elder financial exploitation.
    Most work in this area comes in to us through our financial
    exploitation helpline. Our oldest caller was 102. She asked for
    assistance in revoking a Power of Attorney that a family member
    had been misusing.
        The third way we work to eliminate abuse is to encourage
    the reporting, investigation, and prosecution of financial
    elder abuse, benefit fraud, and other exploitation through
    training for seniors, professionals, government employees, and
    community advocates.
        Our professional training includes working with bankers and
    lawyers. We have specific publications on both the civil
    litigation and criminal prosecution of elder abuse cases. We
    are currently working with our Attorney General's office,
    training law enforcement personnel.
        In addition, our office hosts one of the Senior Medicare
    Patrol projects, working to train seniors to spot and report
    Medicare fraud.
        Fourth, we advocate for improvements in the law and
    additional public funding to support prevention and prosecution
    of elder financial exploitation. We have successfully lobbied
    for increased funding by the state to our counties for elder
    abuse investigations. The Wisconsin legislature is currently
    reviewing both our guardianship laws and our protective
    placement laws.
        Financial abuse of elders is now where domestic violence
    was 20 years ago. No one wants to admit how extensive the
    problem is.
        Unfortunately, elder financial abuse is a low priority
    among the general public, among law enforcement, and within our
    government. We need to change this. We need greater
    coordination between social service agencies and the law
    enforcement community. We need to create a dialog between those
    who have direct contact with vulnerable seniors and those who
    can take actions to protect them.
        We need to realize that this is not just a family matter.
    We need a major change in the public attitude toward the
    victimization of seniors. This will require the reintroduction
    and passage of the Elder Justice Act and funding to support
    increased coordination between the aging network, financial
    institutions, and law enforcement.
        In closing, I am proud of the work that the Coalition of
    Wisconsin Aging Group, its Elder Law Center, and the other
    elder justice advocates have done, but limited resources means
    limited results.
        We need to empower our local communities with financial and
    legal means to prevent and prosecute elder the financial
    exploitation.
        If we do not do so, there will only be more victims and
    more abusers.
        [The prepared statement of Ms. Dicks follows:]

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        The Chairman. Thank you very, very much.
        Vicki Hersen is from my State of Oregon. Thank you, Vicki,
    for coming all this way, and we invite your testimony.

     STATEMENT OF VICKI HERSEN, DIRECTOR OF OPERATIONS, ELDERS IN
                          ACTION, PORTLAND OR

        Ms. Hersen. OK. Thank you.
        Good afternoon, Chairman Smith and Senator Kohl. I am Vicki
    Hersen, director of Operations for Elders in Action, and I am
    honored to be here today, and thank you for convening this
    hearing to address the critical issue of ``Old Scams, New
    Victims: Breaking the Cycle of Victimization.'' Elders in
    Action is a powerful voice for local seniors in the Greater
    Portland area. We have a 37-year history of tackling important
    issues of concern for seniors, and we believe quality of life
    should never depend on age.
        Our small staff relies on the time and talent that 200
    volunteers provide in delivering key services, including our
    ombudsmen and community education program.
        The ombudsman philosophy embodies the neighbor-helping-
    neighbor approach. Our volunteers provide personal support,
    information, guidance, and advocacy to fill gaps in meeting the
    needs and solving problems for our growing senior population.
        For seniors who are alone, confused, or afraid, or have
    nowhere else to turn, our volunteers provide a lifeline. More
    than 2,400 elderly victims of crime in the Portland area have
    been helped by Elders in Action ombudsmen since this innovative
    program began in 1998.
        Victims of Crime Act funds, through the Oregon Department
    of Justice, help support this vital service. This is for
    seniors who live independently in their own home and it is not
    to be confused with the--long-term care ombudsmen program,
    which is funded through Older Americans Act money. But this is
    for folks who live in their own home or apartment.
        We helped individuals such as Georgia, who was terrified
    when a friend of her sons moved in and began stealing from her
    and threatening her. With our help, Georgia filed a restraining
    order and was able to take the steps necessary to live in an
    abuse-free environment.
        Then there was May, who had hired a contractor for some
    maintenance on her home, and ended up being a victim of his
    fraud.
        Last year, we helped victims of scams and fraud recover
    over $90,000 in benefits owed and funds lost to crime. Our
    volunteers have the time and the heart to keep working with the
    seniors for a positive solution.
        When an urban renewal area became a hotbed for opportunists
    to buy houses from seniors, we were there to assist. One 82-
    year-old victim was targeted by a man with a high pressure
    sales pitch, convincing her to sell her house for $88,000.
    Later, she was confused about what had transpired, and she
    called our ombudsmen services, and after reviewing the
    paperwork and making phone calls on her behalf, we were able to
    reverse the below market agreement and we saved her from a
    $48,000 loss when she sold the house for $136,000 a few months
    later.
        Our community education volunteers work to prevent local
    seniors from becoming victims in the first place by providing
    practical information and resources about senior scams, fraud,
    ID theft protection, home security and safety and predatory
    lending schemes.
        Last year, we provided 7,100 seniors with important
    consumer information at 94 community events. Such senior-to-
    senior prevention education is critical in helping seniors
    become more attentive to their surroundings. These include the
    many fraudulent schemes that are becoming rampant via mail,
    phone, door-to-door, and e-mail.
        One of our volunteers says, you can be robbed by a gun or
    you can be robbed by the phone, and the phone is a lot easier.
        She provides practical tips to her peers on cutting down
    the paper, credit cards, and sensitive ID information that
    people carry with them.
        Elders in Action volunteers advise seniors to keep their
    antenna up for things that just don't seem right. The old adage
    holds that if it sounds too good to be true, it probably is.
        Communication and prevention of isolation of seniors is
    crucial to breaking the cycle of victimization. We encourage
    seniors to call Elders in Action to see if mail that they may
    have received or an e-mail or a door-to-door offer or a phone
    offer is real.
        Our volunteers help file reports to our State Attorney
    General's Financial Fraud and Consumer Protection Division, the
    Construction Contractors' Board, the Oregon Division of Finance
    and Corporate Securities, and other consumer protection groups.
        Creating opportunities for seniors to get involved in their
    neighborhood or at their local senior centers is also a way to
    break barriers to isolation.
        We encourage seniors to talk with each other if they're
    suspicious, or if they have been a victim of a crime so that
    their peers may be informed.
        In fact, one of our victims of identity theft, luckily knew
    not to give the person information, but someone had actually
    taken out a credit card in her name. She came to us and one of
    our volunteers assisted her in getting it cleared up. She is
    now one of our ombudsmen volunteers, so she shares in the
    community her experience to be alert and informed.
        A local senior service agency case manager has said that 25
    percent of their elderly clients have been a victim of ID theft
    or scams. One key solution to ID theft is to install mail slots
    or locked mailboxes, to pick up new checks at your bank, and to
    only put your mailing address on checks with your first
    initial.
        Unfortunately, Medicare Part D prescription drug benefit
    that people have been mentioning about that takes effect in
    January creates new fodder for scammers and other opportunists.
        Already we've received calls from three types of schemes
    who are taking advantage of seniors' uncertainty about the
    upcoming changes. One involved an insurance company using heavy
    handed sales by phone and not fully disclosing all information,
    not allowing the consumer to make an informed choice. A second
    came by mail and stated that the President has announced the
    guidelines for Medicare reform and went on making it sound like
    an official notice, then asking for phone, name, address, and
    birth dates of the Medicare beneficiary and spouse. No company
    name or contact information was listed on the return postcard,
    and the return address was a post office box, which is also a
    red flag.
        The third involved a company calling a woman in an assisted
    living facility. They made it sound like they were an official
    Medicare company and offered her $20 to answer a questionnaire,
    which lasted an hour. In reality, they were fishing for
    confidential information.
        There's a significant link to financial loss from robbery,
    ID theft, and health deterioration. Most of the victims we
    assist live on low, very fixed incomes, and a loss of a few
    hundred dollars can tear their world apart. The trauma of a
    stolen purse exacerbated an already existing health condition
    in one of the seniors we assisted, and she ended up in a
    nursing home as a consequence.
        The criminal was a repeat offender who stole the client's
    ID, wrote checks, and cashed her tax refund.
        Please consider the following solutions: Provide help and
    assistance within the police and court system for aging
    awareness training, tracking of scams, and more investigations,
    and I really appreciate the elder friendly materials that you
    were sharing with us, because we use a lot of focus groups with
    our local media and with just different groups, because we have
    seniors who are willing to share their information, and the
    importance of large enough fonts, colors, certain colors that
    people find hard to see on web sites and things like that are
    in print. So that's really great.
        Present senior-sensitive messages--TV spots, newspaper
    stories, and ads--about where to get help. Provide more
    significant funding for programs that educate seniors so they
    know how to avoid being victims of fraud, and provide funds for
    programs to train peer advocates for senior victims of crime.
        Thank you for the opportunity to share how Elders in Action
    works to prevent problems and solve difficult situations for
    seniors. Our elders deserve much more, given the contributions
    they have made to our society. Let us translate this into funds
    for those who really need it and create ways to gather the
    talent and wisdom that our elders can give to our community.
    Thank you.
        [The prepared statement of Ms. Hersen follows:]

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        The Chairman. Thank you very much, all of you, and Vicki,
    if you could tell us what are the two or three biggest sorts of
    scams going on in Oregon right now? Is it Medicare Part D?
        Ms. Hersen. Well that's new, but like the identity theft
    and, as you know, meth is just so rampant in the West Coast.
    It's really bad, and we found a lot of victims have sons or
    grandsons living with them and financially exploiting them, and
    so we've been working with them to get restraining orders, and
    work with adult protective services. So that's really--identity
    theft----
        The Chairman. Relatives with a pernicious motive living
    close by?
        Ms. Hersen. Yeah. It was interesting, when Senator Carper
    mentioned three of the issues with regard to his mother are
    issues that we have all helped with--aggressive vacuum cleaner
    sales people. This is really hard, because sometimes the person
    may be selling a legitimate item, but it is their tactics, and
    we do have one volunteer who I love--she's this particular
    vacuum maker's kind of advocate or anti-advocate--because the
    people came at six o'clock in the evening and came to the
    woman's house and were there for over an hour and she ended up
    buying a $1,300 vacuum, and she has wood floors. But really to
    get them out of her house.
        So we were able to reverse that, and everything. Then they
    made some really sly comments. She says, ``Well, I can't lift
    this upstairs where my carpets are,'' and they said, ``Oh, we
    will come over and help you every time you need to.'' Just give
    us a call.
        So it is things like that. Also construction fraud and
    scams. That is why we really educate people not to respond to
    flyers or people coming buy and saying ``Oh, I see your gutters
    need to be repaired or a roof.'' wee advise people to call
    first and how to do that in a positive way.
        The Chairman. I think it is clear from the testimony we
    have heard from all of you that, you know, Oregon, Washington
    was mentioned; California certainly. There are some very
    excellent programs to help the elderly avoid these things that
    have a national focus on this. Are there other states that we
    should mention who have good programs or states where they
    really need to shore it up?
        Ms. Park. I guess I think this is in some ways more of a
    national, from my point of view, the structuring of information
    and warnings to elders. It might be very useful--I have been
    thinking about how to solve this for the government, to set up
    a best practices standard and perhaps if some short-term
    requirement were made to have materials for seniors put out by
    Federal agencies reviewed. If that happened for a period of 6
    months or a year after developed in conjunction with
    scientists, it might be the case that that would become part of
    the culture of developing materials for elders.
        The Chairman. If I asked you, Dr. Park, what is the best
    thing the Federal Government can do to help stem this, would
    that be your answer?
        Put up--you know, put together kind of a clearinghouse of
    best practices?
        Ms. Park. From the point of view of the kind of thing that
    I do, yes. I think the other thing is to be really clear about
    how do you effectively warn seniors. So I can--we can design
    the very best messages and the clearest, but the problem is
    they have to reach people. With the Internet, 200 television
    channels, radio, it is less clear how to get people to process
    messages. I was telling your staffer I was very impressed.
    Someone in town where I live felt that our president of the
    university was very unpopular to him, not to others. It was a
    lawyer, and he put a billboard in town criticizing this
    individual and ultimately resulted in this individual resigning
    and taking another job.
        I think everyone in town saw that billboard and those are
    cheap and effective, and when you think of when you were a
    little kid, Smokey the Bear, Only You Can Prevent Forest Fires.
    We all know that. I think getting some billboards. This is
    just. This is what I think. It's not what I know, if you see
    the difference. I haven't done research on this. But I think
    presenting a short message so that--Afraid You're Being Scammed
    or something like that a phone number or an Internet web site
    that people can check and having some kind of branding of this
    so that people know this is a national priority and there is a
    place to go if you just think there is any chance you might be
    defrauded so that they can get the information that they need.
    So one is to be effective. The other is to make sure you
    communicate.
        The Chairman. But it is truly an excellent suggestion. As
    we look to reauthorize the Older Americans Act, we ought to--
    Senator Kohl and I ought to work together on an amendment that
    will create this kind of best practices center and create this
    branding, and create these simple messages that can be of
    assistance to the States.
        Dr. Pratkanis, you spoke of the Wise Senior Center's,
    telemarketing victim call centers. Is this the kind of thing we
    are talking about?
        Mr. Pratkanis. Yes, there is a number of approaches to take
    depending on the level of victimization, and the call center is
    excellent for getting people who are at risk or who may be in
    the process of being victimized. For those, I don't think the
    mass-marketed communications necessarily is the most impactful.
    They need somebody, such as Oregon, where there is an advocate
    in their camp. So the Wise Senior Center could serve as a model
    for that through its reverse boiler room where they're
    contacting people who are vulnerable, on the mooch list right
    now, and they are also have services there to help folks when
    they have similar situations that Ms. Hersen described in her
    statement.
        But personally, I would like to see that duplicated as much
    as possible.
        The Chairman. Are other States doing it? I mean you
    mentioned Washington.
        Mr. Pratkanis. I'm not aware of that, Senator.
        The Chairman. But Washington State is doing it?
        Mr. Pratkanis. Washington State has a different set of
    programs. They don't have the call center at Washington State.
    What they have is AARP does education for community leaders--
    people at nursing homes and so forth--that teach them about the
    crime and then they go out and teach other people in their
    State.
        But it would be nice to have in different regions,
    different areas, these kinds of centers that could serve as a
    focus to disseminate information, to set up best practices, to
    continue to do the kinds of research that it needs to fight the
    next round of crime.
        The Chairman. Helen Dicks, do you have a comment?
        Ms. Dicks. I was going to say one of the things that we
    have done to try to reach the isolated elderly is we have
    recently produced a piece about financial exploitation that
    listed services for seniors and put them in home delivered
    meals. That was one way we thought of reaching people who were
    not coming into senior centers and didn't have regular contact
    with other people. We included--I put this in our packet that
    we gave a card, one side is about financial exploitation; the
    other side is a more general piece about other services
    available to seniors.
        The Chairman. Senator Kohl.
        Senator Kohl. Thank you. Helen, you are so experienced in
    our State with respect to these issues--I mean there are so
    many things that we could list. What are one or two of the most
    important things that we need more of? Law enforcement? Do we
    need more resources? Do we need more publications? If you could
    manage to get accomplished two or three things that would
    reduce the level of victimization, what would they be?
        Ms. Dicks. I think the two biggest things that I would do
    is one education of professionals, that is, the law enforcement
    community, with the real emphasis that this is truly a crime.
    It is not a consumer protection, regulatory issue. This is not
    a question of a family matter. Elder abuse is being minimized.
    We really need to convince law enforcement and the general
    community that this is a serious crime and it has to be treated
    like a criminal matter.
        Then the other part, in order to change of the attitude of
    professionals, is we have to change the general public
    attitude. If we had good publicity coming out of criminal
    prosecutions, I think it would help scare off the abusers. I
    think we talk a lot, and I do a lot in terms of educating
    seniors so that they don't become victims, but we also have to
    do something strong to limit the influence and the activity of
    the abusers. I don't think we have enough emphasis in that
    particular area, and I don't think the law enforcement
    community has enough resources to pursue this such a comment
    was made earlier. We need to provide seniors who are going to
    go through the criminal justice system as witnesses with some
    kind of support and background so that they aren't traumatized
    again by the court system after being victimized by the crime.
        Senator Kohl. Those are good comments.
        Mr. Pratkanis, would you like to comment?
        Mr. Pratkanis. No, I agree wholeheartedly with that. You
    know, victim advocates right in the court system.
        In addition, the other thing that I worry about is some of
    the FBI agents are switching some of their focus into the War
    on Terrorism, and that leaves some gaps at the Federal level in
    terms of investigation. I understand their priority. I have
    made a similar kind of switch in my research, but that doesn't
    mean the gap doesn't go away, and real success on this crime in
    terms of prosecution started in the late 1980's, and with
    Operation Disconnect and a few other FBI operations. As agents
    get switched over to other areas, there leads to be that gap,
    and it has to be Federal and international.
        Senator Kohl. Helen, I know you have developed many
    publications around the issue of victimization of our seniors.
    In your experience, what is the best way to get these
    publications into the hands of seniors?
        Ms. Dicks. Well, we kind of have a several-fold approach.
    One is that we go to every conference, every gathering of
    seniors every time we can get together with either seniors or
    their advocates and get the information out that way. We also
    do as much as we can through publicity within the aging
    network. We give a certain amount of our materials out without
    charge. Unfortunately, we can't do a great deal of that because
    of financial restraints.
        The other thing that we do with our publications I don't
    know what the professor would think of this--but our
    publications that are for seniors are very clearly distributed
    as senior publications, and we keep them at a very low cost.
    For professional publications, we make it more obvious that
    they are more dense. They are written differently. They
    encourage the professional community to start taking actions in
    this area.
        I also find that we get a good response when we use talk
    radio and radio broadcasts that are specifically focused on
    senior issues. Of course, in Wisconsin, since we are dealing
    with a very rural population, ``Farm Hours'' and other programs
    of that nature are also useful in getting out information and
    the weekly shoppers.
        Senator Kohl. That's very good. Any other comments from
    members of the panel on issues? Yes. Dr. Park.
        Ms. Park. I would just like to make one other small
    comment, Senator Kohl, and that is the--I think the Committee
    on Aging should also be concerned about an inadvertent kind of
    fraud and I hesitate to use the word fraud, but the
    presentation of materials, such as this Medicare Section D
    Plan, that people can't understand, and they can't understand
    the benefits that are available to them and how to secure them
    because the options are too many. They don't--people can't
    process that many choices, and they don't have enough
    information to make good decisions.
        So I think when laws are passed for seniors that implicate
    things like their health care, again, there should be some
    sense that the options available to them can readily be
    processed and acted upon by the people these laws are intended
    to help.
        I think that is a major concern as things become more
    complex with these different plans.
        Senator Kohl. Thank you.
        Ms. Hersen. Yeah. No, those are good comments. I agree. We
    have seen that as far as confusion, and we want to make sure
    people are informed and are able to make wise choices, but with
    the confusion, it makes it more difficult, and I agree. It is
    really important to educate law enforcement and the
    prosecution--in providing aging awareness training to them, so
    they do take these crimes seriously. I mean we have had
    examples--luckily, we have one--an elder crimes unit in the
    Portland Police, which we helped start back in the 1990's, but
    some officers, it is just not up there, you know, and they
    don't realize. One perfect example was a woman called us and
    she had put her car for sale. This is a perfect scam. Someone
    can go through the newspaper. Look who's selling cars. Her name
    was kind of an old fashioned name. If you heard her on the
    phone, you could tell that she was very elderly. The guy ended
    up coming or giving her a deposit of $50 and said can I test
    drive it? Well, he test drove, and, of course, stole her car.
        So when she reported it to the police, well, the first
    police officer didn't take it seriously. Well, it is just too
    bad. Well, losing $750 meant a lot for someone on a fixed
    income. That was probably a couple months of prescription
    drugs, food, fuel to heat her apartment. So someone from the
    Elder Crimes Response Team did start looking into this, but it
    is that attitude not realizing the importance of having
    investigators and reporting. This is probably going on in all
    of Oregon for people who are abusing meth, as an easy way to
    get money. They make these phone calls, and they play the
    lottery. They will call like 20 or 30 people and then find out,
    oh, this person wants to sell their car, and then steal it.
        So it does need to be taken seriously by both law
    enforcement, and any way we can help. We do have senior
    volunteers who provide aging awareness training and so actually
    today and yesterday our Portland Police was having a training
    involving citizens on better communication techniques.
        The Chairman. Thank you, Senator Kohl. To each of our
    witnesses, please accept our heartfelt thanks for your
    willingness to travel here, and to share your skills and your
    experience. You have added measurably to the Senate's public
    record. You have given us many good ideas to work on at the
    Federal level. We are grateful to you.
        We also thank C-SPAN for covering this hearing, because,
    frankly, the more we get information out and heighten
    awareness, the more successful we will be in apprehending,
    prosecuting, fining, and jailing those who would prey on the
    elderly.
        We say to those who would do such a thing that if we don't
    catch you, we trust there is a hot place in Hell for you. So
    each of you beware and all of you who have helped us today, we
    thank you, and we are adjourned.
        [Whereupon, at 4:31 p.m., the committee was adjourned.]

                                A P P E N D I X

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