Disabled veterans in Texas fleeced by VA-appointed money managers
By LISE OLSEN AND LINDSAY WISE | Houston Chronicle | Published: May 21, 2012
Already a convicted petty thief, Mildred Fedd had pressing bills to pay: parking tickets, a faulty sewage system, house payments and the impound lot holding her truck hostage. So she turned to the U.S. Department of Veteran Affairs and promised — for a small fee — to watch over an 82-year-old disabled veteran.
With his $5,000, she agreed to buy him a burial plot. Instead, the Houston caregiver paid her own bills — and got caught only after she had spent all his money and went back for more, Harris County records show.
The Veterans Affairs' Inspector General has repeatedly warned about a plague of fraud and theft in a national program that appoints family members and VA-approved fiduciaries to protect a whopping $3 billion in assets belonging to veterans the government considers too disabled to manage their own money.
In the past decade, twice as many Texans have been prosecuted for stealing from disabled veterans enrolled in the VA fiduciary program as in any other state, records obtained by the Houston Chronicle show. More than 20 veterans' family members and trusted members of the community — including a former police officer, a federal employee and optometrist — have been convicted and others, including two attorneys, face pending charges of stealing from disabled veterans whose assets they'd been assigned to protect, according to court records from across the state.
Waco optometrist David Fram took $126,250 from a veteran to help prop up his own private business, thefts meticulously documented in financial records later used against him, federal court records show. Charles D. Stange Jr., a former Bexar County sheriff's jailer and ex-military policeman, went to prison himself for stealing $272,000 he'd supposedly been safeguarding for his own disabled veteran dad.
Some victims infirm
And a Houston lawyer, Joe Phillips, and his wife, both in their 70s, allegedly stole $2 million from two dozen veterans in another pending case described as the largest rip-off ever reported in the VA fiduciary program — a case in which the perpetrators are accused of hiding thefts for years by forging bank officers' signatures, inventing fake money market accounts and shifting money between various Texas and out-of-state banks.
Phillips, whose trial is pending, has denied the allegations and refused interviews. His wife pleaded guilty to conspiracy and filing false income taxes in April.
Many sordid swindles were perpetuated on veterans too ill or disabled to report the crimes, records show. Some crimes went undetected for years before being uncovered through tips, thieves' confessions or the VA's own infrequent checks, interviews with attorneys and court records show.
One San Antonio disabled vet's daughter got suspicious when a bill collector called about delinquent payments for a new Ford Focus. Her dad, permanently hospitalized in a VA treatment center for his dementia, no longer drives and knew nothing about a car. A subsequent investigation revealed that his sister, Rosa Avila, and his niece had for five years stolen $180,000 of his money while telling the veteran "all his VA benefits were being saved" and never bringing him more than $20 at a time.
At least two Texans convicted in veteran scams had criminal records — but still got approved by the VA as fiduciaries. One Houston veteran's sister with prior petty theft convictions blew part of her brother's $30,000 in at least 20 casino trips, records show.
VA: Theft reports rare
In interviews and written statements, VA officials told the Chronicle that they have set up a new "hub system" to improve oversight: Texas fiduciaries will be overseen by a Nebraska office. VA now requires background and credit checks for newly appointed money managers, bans ATM withdrawals and reviews bank statements annually. Reports of theft remain rare, officials say, given that 96,000 fiduciaries assist veterans nationwide, about 6,200 in Texas.
David Autry, spokesman for the nonprofit organization Disabled American Veterans, called on the VA to exercise greater oversight and to punish anyone who financially exploits vulnerable veterans.
"It's an outrageous situation when someone takes advantage of veterans who have served and sacrificed for their county," he said. "I think that's one of the lowest things you can do."
Federal prosecutors in the Eastern and Western District of Texas each handled the six cases involving fiduciaries in the last decade — while their counterparts in the Northern and Southern Districts of Texas often declined to prosecute or referred cases to local DAs.
Alan Jackson, criminal chief of the Eastern District of Texas, said his office prosecutes even some small-time family scammers to try to deter others from dipping into cash or benefits rightfully belonging to the disabled. Jackson said the feds have more tools to help recover veterans' money than many rural county DAs, who often lack experience prosecuting corruption or in managing forfeitures.
'That's an invitation'
"My thought is if we don't prosecute them, that's an invitation to somebody else to think: 'I can do it,' " he said. "Your typical offender is not a repeat criminal sort of person — it's somebody who sees the opportunity and decides nobody is going to get hurt, and boom."
His district's most recent case involved Tiawa Braxton, a 31-year-old self-styled hip-hop recording artist from Texarkana who was convicted of stealing $45,000 from the VA after he failed to report his father's 2007 death and continued collecting benefits for two more years in the dead man's name.
Most VA fiduciary scams took at least two years to prosecute and perpetrators often received probation — conditional upon repaying stolen funds. Efforts to recover veterans' money have had mixed results.
As part of his federal probation, Fram, the Waco optometrist, last year finished repaying more than $120,000 he took from one of 15 veterans whose accounts he managed for years as a professional VA fiduciary.
$272,000 in 'loans'
Charles D. Stange Jr., a former jailor for the Bexar County Sheriff's Office and a Gulf War-era veteran himself, lost his house in a federal forfeiture action a judge ordered in an attempt to recover $272,000 in "loans" that Stange stole from the estate of his disabled veteran father. VA officials attempted to remove Stange as a fiduciary, but Stange refused to relinquish control, records show. Stange died last year after completing a 30-month prison term.
The VA has been forced to repay much of the $2 million allegedly taken from veterans by Phillips, who retains his law license two years after his 2010 indictment. Phillips, a former VA employee, declared bankruptcy and successfully argued in related civil suits that the government should repay veterans for their losses because of its lax oversight. His criminal trial is set for June.
Another Houston businessman, convicted in federal court in 2004 for stealing approximately $14,000 from a disabled veteran, subsequently failed to pay and had his probation revoked in 2008. The second time around, a judge ordered Bohdan S. Welch to pay $40,600 based on additional evidence. Angela Dodge, a spokeswoman for the Southern District of Texas, said she could not confirm whether Welch is paying now.
The most recent Texas conviction involved a 40-year-old Fort Worth woman who got approved to manage her father's VA benefits in July 2008, then stuck him in a nursing home and spent his money on herself. Yolanda R. Robinson got probation and was ordered to repay $9,305 in January 2012.
Justice came too late to help her disabled dad. He died in 2010.
Craig Kapitan and Eric Nalder contributed to this report.