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Reforms starting for guardianship system

Copyright © 2017 Albuquerque Journal

More than 100 adults, including incapacitated and disabled people, are alleged to have suffered combined losses of at least $8 million at the hands of New Mexico guardians and a trust company that were supposed to be watching over their finances.

So far, there is little indication these people will recover their money because of weaknesses in the safety net designed to protect them.

Yet, some changes are in the works.

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For instance, judges assigned to the civil bench in Bernalillo County have agreed to require conservators to post bonds when appointed to manage funds of an incapacitated person with assets over $30,000, said civil division chief Judge Shannon Bacon and chief Judge Nan Nash. Currently, state law gives judges the option to do so, but it’s not mandatory.

Meanwhile, Bacon has asked the state Supreme Court to support legislation that would make the bond posting requirement mandatory.

Bacon said in a July 18 letter to Chief Justice Judith Nakamura that while judges can currently require bond, “In our experience, this statutory provision is rarely if ever employed by courts in Conservator cases.” Bacon wrote that the bond would be paid for out of the assets of the estate, “as it protects the value of the estate and inures to the benefit of the protected person.”

Changing the law to require bond would “provide additional protection for the estates of incapacitated adults,” Bacon wrote.

Bacon has also asked State Auditor Tim Keller to audit all commercial guardianship companies on contract with the state Office of Guardianship.

System rocked

While some judges and others have publicly defended the commercial guardianship industry in New Mexico, the system has been rocked by two recent cases.

In one case, the FBI and state agencies are investigating the alleged embezzlement of at least $4 million from an estimated 70 clients of the Desert State Life Management trust company. In the other, federal prosecutors have filed a 28-count indictment against two top managers of the Ayudando Guardians Inc. guardian/conservatorship company – president Susan Harris and chief financial officer Sharon Moore. The company itself is also a defendant.

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Federal documents allege that more than 40 clients’ Ayudando accounts were siphoned over a period of years. Client funds were allegedly used to pay off more than $4 million in charges on a company credit card account used by Harris, Moore and their families for personal purchases.

Court records show that Ayudando was appointed as conservator, or guardian/conservator in more than 40 court cases since 2010.

Desert State served as court-appointed conservator in about seven cases in recent years, but the company’s focus was primarily on managing private trust accounts for special needs clients, the elderly and others. In some cases, family members were guardians in charge of care, but relied on Desert State for money management.

One of Desert State’s conservatorship cases involved the loss of as much as $600,000 intended to help care for four developmentally disabled adults, according to one recent lawsuit pending against Desert State.

In that case, Desert State filed the required annual reports with District Court and noted that an accounting was attached. But an attorney in the case says there was no accounting in the court file.

As a trust company, Desert State falls under oversight of the state Financial Institutions Division. But the company is designated as nonprofit and wasn’t required to post a bond when Paul Donisthorpe took over as CEO in 2006. The state also hadn’t conducted a financial examination of Desert State’s books since 2008.

New Mexico Regulation and Licensing Superintendent Mike Unthank said his agency is proposing legislative changes to ensure clients of nonprofit trust companies, like Desert State, are better protected.

“We believe moving forward with reforms for non-profit trust companies will be crucial to ensuring this type of victimization cannot happen again. My plan is to put forward a straightforward, common sense approach with backing from the industry and with the good of all New Mexicans in mind,” Unthank told the Journal on Friday.

Ayudando is also a nonprofit corporation, but is not a trust company. In addition to reporting to the courts, Ayudando was subject to oversight for the state Office of Guardianship for about 166 indigent or low income clients who receive guardianship services.

Under its most recent state contract, Ayudando posted a $1.5 million “fidelity” bond, said John Block III, executive director of the Developmental Disabilities Planning Council. He said the bond would cover expenses incurred by the guardianship office in finding new guardians for Ayudando clients in light of the recent federal indictment.

But Block said it hasn’t been determined whether that fidelity bond could be used to reimburse Ayudando clients for their losses.

More info required

Bernalillo County District Court, which has been working on guardianship/conservatorship issues for more than two years, has substantially increased the amount of information conservators are required to provide in their annual reports to the court. Those reports are confidential under state law, but are designed to help judges oversee the incapacitated people whose finances are managed by conservators – private or professional.

Instead of relying solely on a two-page form in use by courts elsewhere in New Mexico, Albuquerque judges are also requiring detailed conservator reports to show the protected person’s income sources. Expenses are to be itemized, down to the amount spent for clothing and entertainment each year.

The new accounting measures adopted in Bernaillo County District Court don’t require documentation, such as bank statements.

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