APPLETON — A former corporate guardian who police say stole from elderly and disabled Outagamie County residents operated within an oversight system that relied largely on his word, The Post-Crescent has found.
In records he was required to file with the county, Jeffrey M. Schend neglected to report client assets and inaccurately reported spending and money received, leaving him room to siphon away hundreds of thousands of dollars, according to an attorney hired to investigate Schend’s dealings.
State law doesn’t require officials to closely audit a guardian’s records.
The suspected thefts went undetected for about six years before clients and their caregivers raised red flags, the attorney found.
Schend, 44, owner of JMS Guardianship Services, was charged May 12 with six felony counts of theft and one misdemeanor theft charge in connection with about $500,000 in missing funds.
Outagamie County first contracted with his firm in 2004 to handle finances and other duties for people ruled incompetent by the court.
The county appointed the investigator after receiving complaints last fall that JMS wasn’t paying clients’ bills.
The investigator, attorney Douglas Hahn, found tens of thousands of dollars in transactions from accounts managed by Schend weren’t properly documented. Schend wasn’t able to show police where the money went.
Sue Lutz, register in probate for Outagamie County, whose office is responsible for collecting and reviewing guardians’ account filings, declined to speak specifically about the handling of Schend’s records. She did say, however, her office follows all state laws regarding guardian oversight and, in some aspects, has more stringent standards than other counties.
Still, she said her office would alter its processes because of this case.
“It’s going to be different,” Lutz told The P-C. “Our procedures and requirements will definitely be changing.”
System based on trust
State law generally requires guardians to provide an annual form listing a client’s beginning asset balance, expenses for the year and assets at the close of the year. The numbers need to balance to gain court approval.
Doreen Koehler, president of the Wisconsin Guardianship Association, said oversight practices vary from county to county. Some, for example, don’t require annual accounting papers for clients who have minimal income or assets.
Lutz said Outagamie County requires filings for every client and court approval prior to large-ticket purchases.
State law does not require detailed audits. Even if the law did, Lutz’s office of three people, which receives some 1,300 annual filings, would not be able to handle the workload, she said.
“Unfortunately, I don’t have the staff to review all the canceled checks and receipts for verification of the accounts,” Lutz said.
The Register in Probate office has the authority to ask for additional documentation if accounting records appear unusual, but “we do rely on the honesty of the account,” Lutz said.
Lutz expects to implement new procedures by the end of the year. Her position is appointed by Outagamie County’s seven judges and she plans to have discussions with the judiciary to determine what changes would improve the system.
Lutz compared the accounting process to the Internal Revenue Service’s handling of tax returns. Filers are expected to accurately reflect itemized deductions. Audits are triggered by suspicious deductions.
The law requires guardians to report accurately.
“It’s a sworn document,” Lutz said. “They’re swearing to the information in there.”
Reports don’t add up
Hahn’s investigation into three accounts, as documented in affidavits he filed in Outagamie County court in April, suggests Schend took advantage of clients.
One client’s bank records show Schend received $9,000 in distributions from a trust fund during his tenure as guardian. His annual report to the county reflected just $5,000 of it.
In another case, Schend did not list a woman’s $13,000 in certificates of deposit in his initial inventory or subsequent annual reports to the county. The CDs were cashed.
“That money would have gone into the possession and control of JMS Guardianship, yet JMS never mentions that $13,000 anywhere,” Hahn wrote.
Attorney Maren Beermann, project director for the Guardianship Support Center at the Wisconsin Coalition of Aging Groups, said one of the first responsibilities of anyone named guardian is to compile a detailed inventory of the client’s possessions.
The beginning value then serves as a comparison point when officials review annual accountings, she said.
Lutz said the inventory is a form document, and there’s no other mechanism to assure they’re accurate. Officials couldn’t legitimately go to every bank to determine whether a client holds an account there, she said.
Accounting discrepancies
Schend was often paid from the assets or income of those he was appointed to serve.
In cases involving clients who didn’t have funds to pay for guardianship, Schend received $100 monthly from Outagamie County, according to his 2010 contract.
Generally, contract rates are used in cases where a guardian is paid from a ward’s assets, said Aaron Janssen, an attorney for Outagamie County.
Schend’s contract contained numerous requirements, including that he “complete annual reports on a timely basis (and) submit to the court within the required timeframes.”
One of Hahn’s affidavits questioned Schend’s adherence to those requirements.
Schend filed an accounting in January purporting to show financial activities for 2010. The client’s file, however, didn’t show a 2009 accounting, “and it is most logical that this is truly a 2009 accounting,” Hahn wrote.
An agency assumed guardianship of the woman after Schend informed Hahn that it was only able to locate about $11,000 of her assets as of April 19. The woman should have had about $140,000, Hahn determined.
Hahn also found the woman had nearly $65,000 in CDs at a bank, and all were cashed in 2010. The transactions aren’t on record with the county.
Schend also neglected to file a 2010 accounting for a man who had nearly $168,000 from a cashed-out trust fund sent to JMS in August. His new guardian hasn’t received any money for his care.
The missing trust proceeds, Hahn wrote, “makes me believe that it is possible JMS has misappropriated some or all of those funds.”
Questions regarding the same trust fund date to 2007. Hahn found the account lost about $124,000 that year, while the stock market gained 3.5 percent. The man’s expenses would’ve accounted for about $66,000 of the trust losses.
“This needs further investigation,” Hahn wrote.
Allegations not rampant
For years, advocates and government groups have recommended stronger protections for those in guardianship situations.
John Pike of Appleton, a former client of Schend, suspected his former guardian took portions of his income well before the county began its investigation.
Pike, who is no longer under a guardianship, said he had medical bills sent to collection companies and couldn’t get explanations about where his income was going. He’s hopeful the investigation into Schend will reveal some of those answers.
“It just appears that no one was looking,” he said.
Those familiar with guardianships say allegations raised in the Schend case aren’t common.
Koehler, president of the Wisconsin Guardianship Association, said people who take on guardianship as a career typically do so because they care about people.
“You’re not going to get rich, you’re going to work unbelievable hours and you’re going to sleep well at night,” she said. “I like what I do and I do sleep well at night.”
Many establish power of attorney for a loved one in an effort to avoid guardianship situations. Lutz, however, said those given power of attorney don’t have to file records.
Beermann’s agency doesn’t get many complaints of financial exploitation in guardianship cases, and she attributes that to the oversight process.
She pointed out that watchdog roles go beyond the accountings required by probate courts. Also, financial institutions and caretakers report suspected wrongdoing. Even without detailed recordkeeping, line items required in accounting records are often sufficient to raise red flags when something is awry, she said.
“It’s easy to get caught,” Beermann said. “Especially if you’re a guardian in a fiduciary capacity, it’s very easy to get caught.”
WHAT’S A GUARDIAN?
Guardianship is a legal process put in place when people can no longer make safe or sound decisions about themselves or their property, according to the National Guardianship Association.
A guardian’s responsibilities vary on a case-by-case basis, but often include handling a client’s finances and protecting a client’s assets. In some cases, a court-appointed guardian determines where a client lives, monitors the client’s medical treatment and makes end-of-life decisions.
Guardianships begin with a petition to the court. Judges consider evidence in determining whether a person is incompetent, whether guardianship is appropriate, who will serve as guardian and with what authority.
Mental illness, developmental disability, physical incapacity and advanced age are among various conditions that have been the basis for appointing guardians, the association says.
What’s next
Jeffrey M. Schend waived his right to a preliminary hearing last week and will return to court Aug. 1 to enter pleas to six felony theft charges and one misdemeanor charge of theft.
Timeline of events
Fall 2010: Outagamie County and the state Department of Health Services began receiving complaints that JMS Guardianship Services, a company owned by Appleton’s Jeffrey M. Schend, hadn’t been paying bills for some of its clients. Schend, a corporate guardian, managed the finances of 48 clients deemed incompetent by the courts.
December 2010: Schend closed his business.
April: Douglas Hahn, an attorney appointed by Outagamie County, investigated Schend’s accounting documents and bank records and determined tens of thousands of dollars weren’t properly documented. The health services department, after its own investigation, revoked Schend’s privilege to serve as a corporate guardian.
May 2: County officials contacted the Appleton Police Department, which began an investigation based on Hahn’s findings.
May 11: Appleton police searched Schend’s home and seized hundreds of items as evidence. Police asked Schend where the missing money was. He couldn’t give officers an explanation. Schend was arrested.
May 12: Schend was charged in Outagamie County Court with six felony counts of theft and one misdemeanor theft count in connection to the missing money.
June 20: Schend waived his right to a preliminary hearing in an agreement with prosecutors, who said they wouldn’t challenge his request for lower bail. Judge Mark McGinnis lowered bail from $100,000 to $10,000 and required a $40,000 property bond. Schend remains in the Outagamie County Jail.
Related Links
Attribution:
Post-Crescent Watchdog: Oversight lacking for guardians
Outagamie County: Changes to be made in light of Jeffrey Schend prosecution
Jim Collar
June 25, 2011
Appleton Post-Crescent
http://www.postcrescent.com/article/20110626/APC0101/106260483/Oversight-found-lacking-county-guardians
Estate of Denial® provides news, analysis and commentary on abusive practices occurring in probate courts and via probate instruments (wills, trusts, guardianships, powers of attorney). We provide original perspective to educate the public regarding this growing threat to both individual freedoms and property rights.
