Report of the Grand Jury

of the

Supreme Court, Queens County

Issued Pursuant to

Criminal Procedure Law

190.85(1)(c)

Concerning Thefts from Guardianships



















Eighth Additional Queens County Grand Jury

September 2003 - March 2004 Term



























This Grand Jury was impaneled upon the application of Queens County District Attorney Richard A. Brown on September 16, 2003, by the Honorable Richard L. Buchter, Justice of the Supreme Court.



























i.





TABLE OF CONTENTS



A. The Court Examiners Failed to Properly Supervise the Guardian's Marshaling and Handling of the Incapacitated Person's Assets. 6



B. The Court Examiners Failed to Properly Examine the Guardian's Accountings. 9



C. Existing Statutory Provisions and Court Rules Do Not Adequately Address Conflicts of Interest that Allow Unscrupulous Guardians to Enrich Themselves at the Incapacitated Person's Expense. 13



D. Existing Statutory Provisions and Court Rules Do Not Provide For Oversight of the Guardianship Once the Incapacitated Person Dies. 15



E. Existing Statutory Provisions and Court Rules Do Not Adequately Provide For Oversight of Court Examiners. 17



A. Guardianships in New York State 20



1. Appointment and Powers of the Guardian 20



2. Annual Accounting and Review by Court Examiners 24



3. Death of an Incapacitated Person - Final Accounting and Estate Matters 29



4. Compensation 31



B. Thefts from Guardianships 32



A. Legislative Recommendations 43



B. Administrative Recommendations 46



ii.

A. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A2

B. New York Mental Hygiene Law, Article 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A3

C. New York Rules of the Chief Judge, Part 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . .A37







































































iii.



In November 2002, Queens County District Attorney Richard A. Brown announced the indictment of an attorney, John Doe, (1) in connection with his having looted the guardianship accounts of a number of incapacitated persons. (2) The attorney thereafter entered into a cooperation agreement with the Queens County District Attorney's Office and ultimately pled guilty to two counts of Grand Larceny in the Second Degree . He was subsequently sentenced to three to nine years' imprisonment and remains incarcerated.



Following the attorney's guilty plea, a long-term Queens County Grand Jury, impaneled September 16, 2003, heard additional evidence regarding the attorney's larcenies and the means by which he concealed his activities for over five years. The Grand Jury heard testimony from a number of witnesses, including the attorney himself, who testified under a waiver of immunity. The Grand Jury also reviewed voluminous documentary evidence relating to the guardianships that the attorney had plundered. Finally, the Grand Jury reviewed two official reports in evidence concerning the guardianship process -- The Report of the Special Inspector General for Fiduciary Appointments (herein "the Inspector General's Report"), and the Report of the Commission on Fiduciary Appointments (herein"the Commission's Report"), both of which were issued in 2001.



The evidence before the Grand Jury indicates that there are serious flaws in the manner in which court examiners -- who are appointed to oversee the activities of court-appointed guardians for incapacitated persons -- examine the guardianship accounts that the guardians are required by statute to submit every year. The evidence reveals that, in many instances, court examiners gave only cursory attention to John Doe's accountings, failing to notice or question obvious irregularities, such as checks written on guardianship accounts and deposited in the attorney's personal bank accounts. In other instances, Doe failed to file any accountings at all -- and was not compelled to do so. In a number of cases, he also failed to promptly notify the Court of the deaths of his wards and failed to file final accountings, although he was required to do so by statute. Nor was there any official oversight of these final accountings to ensure that they were examined for discrepancies or, indeed, filed at all. Finally, to cover his tracks in at least two cases, Doe drafted wills by which the incapacitated persons in his care purported to bequeath to him the bulk of their estates. He felt free to do this since there is no specific statutory provision or court rule prohibiting a guardian from benefitting from an incapacitated person's estate. In short, John Doe's large-scale thefts from fourteen guardianships -- amounting to more than $2 million over a five-year period -- went unnoticed because the court examiners were lax in carrying out their responsibilities and the guardianship system did not contain sufficient safeguards to prevent or detect those thefts.



Following careful consideration of this evidence and the applicable legal instructions, including instructions with respect to Article 81 of the New York Mental Hygiene Law and Part 36 of the New York Rules of Court, the Grand Jury submits this report to the Honorable Richard L. Buchter, Justice of the Supreme Court, State of New York, pursuant to Criminal Procedure Law 190.85(1)(c), recommending legislative and administrative action based upon the findings specified herein.

Article 81 of the New York Mental Hygiene Law establishes a system of guardianship to help to ensure that the assets of individuals who are incapable of managing their own affairs are looked after and protected. The evidence before the Grand Jury, however, demonstrates that the system has gone horribly wrong. Because of the existence of a number of loopholes and deficiencies in both the existing statutory provisions and court rules relating to guardianships and the enforcement of those provisions and rules, as well as the laxity of those appointed to oversee the guardianships themselves, instead of serving to protect the assets of incapacitated persons, the existing guardianship system presents the opportunity for unscrupulous guardians to loot the assets of their wards and enrich themselves with impunity.



The Grand Jury heard evidence that John Doe, an attorney, stole over $2 million over a five-year period from fourteen separate guardianships. Although Article 81 required him to exercise "the utmost care and diligence" and "the utmost degree of trust, loyalty and fidelity" toward his wards, the attorney knew that no one was looking over his shoulder. He testified that "[N]obody looks at anything. You can just file your papers with the Court. . . . [T]here is nobody who watches over you, no watchdog agency." Doe accomplished these thefts with astonishing ease. He did not use any complex accounting methods to hide them. Instead, he simply reached in and helped himself to the assets of those whom he was chosen to protect knowing that there was nothing or no one to stop him.



Serious flaws in the statutory provisions and court rules, and their enforcement, were thus responsible for creating the scenario that permitted John Doe's larcenies to go unnoticed, in some cases for years. In response, the Grand Jury recommends a series of legislative and administrative changes that would:



(1) abolish the existing system of appointment of private attorneys and others as court examiners and replace them with full-time employees of the Office of Court Administration;



(2) require stricter enforcement of the existing accounting provisions of the Mental Hygiene Law;



(3) establish notification requirements to ensure communication between guardians and court examiners, between financial institutions and the Court and between the Supreme Court and the Surrogate's Court;



(4) address and prohibit conflicts of interest;



(5) establish uniform statewide procedures and forms for the examination of guardian reports and accountings; and



(6) strengthen and enforce remedies for the failure to adhere to proper accounting and examination procedures. (3)







In several cases, John Doe was able to hide -- and steal -- assets from the very beginning of the guardianship. He was able to do so because there were a number of lapses on the part of both the guardianship system and the financial institutions holding guardianship funds.



No control over number of bank accounts. There currently is no requirement that financial institutions notify the Court when guardianship accounts are opened. In one case, Doe opened nine separate bank accounts for an incapacitated person, but in his accountings reported only four of them. A forensic accountant who investigated Doe's case testified that the only reason to open that many accounts would be to hide funds. No one was able to question why Doe had so many guardianship accounts for a single incapacitated person, because no one knew that he had that many. Notification to the supervising Court -- and to the court examiner -- is necessary whenever a guardianship account is opened so that court examiners will have an accurate picture of the incapacitated person's assets independent of the guardian's accounting.



Unchecked withdrawals and overdrafts. Neither the statutory provisions nor the court rules set limits on a guardian's withdrawals from and overdrafts against the guardianship account. In a number of cases, Doe simply withdrew monies from guardianship accounts and deposited them in his own account. Indeed, it was primarily through simple withdrawals that over $600,000 was stolen from one guardianship alone. A court official testified that a guardian should never be permitted to freely withdraw cash from guardianship accounts. The financial institutions involved simply accepted such withdrawals as a matter of course, and the court examiners were simply unaware of them because when the incapacitated person died their responsibility ended and the guardian never filed a final accounting. Moreover, no additional action was taken to ensure that the final accounting was filed. Similarly, exhibits before the Grand Jury show that Doe frequently overdrew on guardianship accounts without being questioned. Financial institutions should be required to report to the Court withdrawals and overdrafts of over $10,000. This is similar to the threshold for federal currency transaction reporting and is an appropriate amount to avoid large-scale thefts. Moreover, financial institutions should be required to render an annual report of all guardianship account transactions to the court examiners and the Court.



Release of funds without court notification. Financial institutions holding funds for the benefit of an incapacitated person are not currently required to notify the Court when the funds are released to the incapacitated person or the guardian. Thus, for example, in two cases, Doe was able to withdraw funds intended for the incapacitated person and divert them to his own account without the court examiner realizing that the incapacitated person had this income-producing asset which was unreported. If financial institutions were required to report payments to an incapacitated person or a guardian, court examiners would have a better idea of the incapacitated person's actual income and guardians would not be able to hide these assets.



Court evaluators missed assets. The Court should take a more active role in overseeing the court evaluator's initial marshaling of a potential incapacitated person's assets. (4) In at least one case, the court evaluator overlooked an existing trust for the benefit of the incapacitated person, enabling the guardian to hide it for a time and steal the payments. If court evaluators were required to investigate an incapacitated person's assets more thoroughly, through financial subpoenas, credit checks and commercially available financial databases, the initial picture of the incapacitated person's financial position would be more accurate even before the guardian is appointed. Moreover, the reliability of the court evaluator's report would undoubtedly be vastly improved if the Court, rather than deciding the guardianship petition on the papers filed, would hold the evidentiary hearing that the statute requires and take a more active role in the oversight of the court evaluator's report. Due process for an incapacitated person requires no less.



No demand for or examination of initial report. Although Article 81 mandates an initial 90-day report in which the guardian must reveal the existence of all of the incapacitated person's assets that he or she has located at the outset of the guardianship, it provides no guidance as to how that report should be examined. An initial report, as one court official testified before the Grand Jury, creates an essential baseline for overseeing the guardian's handling of the incapacitated person's assets. Without that baseline, court examiners cannot effectively supervise the guardian's financial transactions on behalf of the incapacitated person. John Doe almost never filed an initial report and the court examiners apparently never demanded one. They thus lost the opportunity to compare that report with the court evaluator's report and to keep an accurate record of all the incapacitated person's assets. That comparison must be carefully made so that all future accountings can be monitored properly. If there are any discrepancies between the court evaluator's report and the guardian's initial report, the guardian should be required to explain those discrepancies under oath.



Failure to report Medicaid liens. There is currently no specific provision in the statute or court rules requiring a guardian to report Medicaid liens and settlements. Such liens and settlements are commonplace in guardianships because many incapacitated persons reside in nursing homes. In at least one case, John Doe failed to report in his annual accounting that there was a Medicaid lien filed against the incapacitated person's assets and that he had negotiated a settlement reducing the amount of that lien. Doe never paid this settled lien, simply taking the money for himself. Expressly requiring guardians to report Medicaid liens and settlements in their accountings will help prevent such opportunities for theft. Court examiners would be sensitized to that requirement and would be more likely to inquire about Medicaid liens and settlements in cases where the incapacitated person is in a nursing facility.



By far the biggest loophole in the guardianship system -- and that which aided John Doe most in his thefts -- was the failure of the court examiners to properly examine his accountings. Every one of the fourteen guardianships from which Doe stole money exposed glaring flaws in the manner in which the court examiners reviewed Doe's work.



Inadequate enforcement of the annual accounting requirement. Although Sections 81.32 and 81.35 of the Mental Hygiene Law provide for removal of a guardian for failure to comply with the requirements of Article 81, it appears that that provision is rarely invoked and has no teeth in the form of penalties other than a reduction in compensation. In John Doe's case, annual accountings were filed late or not at all and in only three instances did anyone seek to remove him. In two of those instances, there was apparently no followup. And Doe was successfully removed in the third instance apparently only because he was already under investigation. Court examiners must be cognizant of the remedies available under Article 81 and must promptly and aggressively seek to enforce them in order to protect the incapacitated persons for whom they are responsible. In addition, removal or reduction in compensation may not be sufficiently severe remedies for egregious situations. Courts should also be empowered to levy civil penalties in the form of fines on guardians who willfully or repeatedly flout the requirements of the Mental Hygiene Law.



Failure to examine backup documents. Existing court rules do not provide court examiners with guidance with respect to how to examine a guardian's accountings. For example, the court examiners in the Doe case in many instances apparently failed to examine the actual canceled checks written on the guardianship account which would have revealed many checks brazenly written to cash or to Doe himself. These were never questioned because some of the court examiners never demanded to see the checks. Moreover, some court examiners apparently never questioned cash withdrawals or examined withdrawal slips.



John Doe also frequently used blank payee checks to hide his thefts. A forensic accountant employed by the District Attorney to review the thefts in the Doe investigation explained how this worked. Doe would write out a check for an amount leaving the payee blank and would thereafter deposit the check in one of his own bank accounts. In the accounting -- assuming that he filed one -- Doe would report that the check had been made payable to a particular entity, such as the Internal Revenue Service. During the examination -- assuming there was one -- if the item was questioned, he would write in the name of any payee and present the cancelled check to the court examiner. Had the court examiner made a practice of reviewing all of the canceled checks and the backup documentation for each transaction, the fraud would have been uncovered or even prevented. (5) The Rules of Court should make clear that scrutiny of this documentation is essential to the examination of the annual accountings.



Failure to conduct examinations in person. Neither the existing statutory provisions nor the existing court rules require a face-to-face examination of the guardian's annual accounting. Indeed, in John Doe's case, the lack of attention to the accountings is pointed up by the failure of the court examiners, in at least one instance, to conduct any examination at all, or in other cases to conduct it in person. In his testimony, Doe described how some examinations were conducted by mail or were delegated to the court examiner's secretary -- "A lot of those people don't look at the paperwork, they just come in at the end and sign off on them. Basically you come in and meet with their secretary." Examinations were also frequently performed late. In one guardianship, for example, five years' worth of accountings were examined all at once. In another, two years' worth were examined at once. These late examinations clearly demonstrate that the court examiners were not scrutinizing Doe's activities. The Rules of Court should require in-person, timely examinations.



No independent audits. There is presently no mechanism to assist the court examiners in supervising the guardian. There is no provision under existing law or court rule for independent audits of the accountings, which in John Doe's case might have kept him honest and the court examiners on their toes.



Inefficient procedures. The form used for accountings is inadequate because it fails to require detailed information about financial transactions, such as dates and payees. Moreover, there is no standard form that is used statewide. Such a form would assist court examiners in finding the specifics that they need in their review of the guardian's transactions and would enable them to catch discrepancies or oddities with more ease. In addition, it is apparent that court examiners, at least in John Doe's case, were not sufficiently thorough because the work is time-consuming. The use of standardized accounting software would ease this burden considerably. It would allow for fast, easy and accurate review of all of the guardian's transactions from the very beginning of the guardianship.





John Doe's guardianships were rife with conflicts of interest that Article 81 and the existing court rules failed to address and prohibit.



Guardians serving multiple roles with no check on their activities. There is no statutory prohibition on a guardian serving in multiple capacities for the same guardianship. In one case, for example, John Doe served as court evaluator, guardian and attorney for the estate after the incapacitated person died. This enabled him to report to himself, without any oversight, regarding his ward's assets, thus allowing him to steal with impunity. Although the court rules have since been amended to prohibit a court evaluator from also serving as guardian of the same incapacitated person, the Grand Jury recommends that this prohibition be set forth clearly in Article 81 of the Mental Hygiene Law and that it be extended to prohibit court evaluators or guardians from serving as the attorney for the incapacitated person's estate without court permission.



No prohibition on the guardian benefitting from an incapacitated person's estate. The statute leaves open the possibility that an attorney-guardian could benefit from the incapacitated person's estate after the incapacitated person's death. In two cases, Doe drafted wills by which his wards purported to leave the bulk of their estates to him, believing, as he told the Grand Jury, that there is no rule against a guardian benefitting from an incapacitated person's estate. It is also of concern that there exists no express prohibition against a guardian drafting such a will for a person who is both incapacitated and under the guardian's protection. A court official suggested -- and the Grand Jury agrees -- that there should be an absolute prohibition against the guardian benefitting from an incapacitated person's estate where the guardian is not a relative of the incapacitated person or someone who was a friend of the incapacitated person prior to the guardianship.



Commingling funds for multiple incapacitated persons in the same family. The existing statutory provisions and court rules are silent on the potential conflict of interest created when a single guardian handles the estates of multiple incapacitated persons in the same family. For example, John Doe was guardian for two siblings at the same time and because he set up a joint guardianship account for them it was virtually impossible for the court examiner to keep track of what was expended on behalf of which sibling. This became a particular problem when one of the siblings died and the annual accounting for the survivor included amounts that had been disbursed on behalf of the deceased sibling. In the confusion that was created, Doe was able to steal thousands of dollars from the guardianship. At the very least, guardians should be required to set up separate guardianship accounts for multiple incapacitated persons in the same family.



Guardians allowed to leave the State and evade responsibilities. There is no provision under existing law or court rule requiring a guardian to maintain a place of business or residence in New York State. Although this is not strictly a conflict of interest, it is troubling that Doe was permitted to move to a distant state and remain the guardian for a number of incapacitated individuals resident in New York. A guardian should always be subject to the jurisdiction of the Court and be physically available to attend examinations, visit the incapacitated person under his or her care and attend to the guardianship's affairs personally. A guardian should not be permitted to move out of New York State and continue as guardian except under extraordinary circumstances.







Another major flaw in the guardianship system is that there is little or no supervision of the guardianship when an incapacitated person dies, allowing dishonest guardians like John Doe to continue to loot the incapacitated person's estate at the expense of the incapacitated person's heirs.



No notification of death. Although the guardian is supposed to file a final accounting, the statute does not establish a deadline for that filing. Thus, in one guardianship Doe waited for months before notifying the court examiner of the incapacitated person's death, having stolen $300,000 after the incapacitated person had died. Indeed, in four other guardianships, Doe was able to steal significant amounts of money after the incapacitated person's death because no one had been informed that the incapacitated person had died. There should be a specific requirement that the guardian notify the court examiner of the incapacitated person's death within five days of the death.



Failure to enforce the requirement of a final accounting. Article 81 does not require the court examiner to examine the final accounting. Although some counties do require such an examination, this is not done in Queens County. A court official told the Grand Jury that where there is nothing to compel the final accounting and no examination occurs, the guardianship goes into a "black hole" without any review of the guardian's activities that might bear on the administration of the incapacitated person's estate. That is precisely what happened in a number of Doe's guardianships. Doe failed to file the final accounting at all -- and no one compelled him to do so. Guardians should be required to file the final accounting within 30 days of the incapacitated person's death unless extended by the court.



The existing statutory provisions and court rules also fail to require examination of the final accountings. These must be examined as closely as annual accountings so that the court examiner can review all of the guardian's transactions from beginning to end. The examination should be performed under oath -- as is done for an annual accounting -- and the Court should review it carefully before approving it. If there are any discrepancies, the Court should hold a hearing so that they can be resolved and the final accounting can be modified, if necessary.





Lack of communication between the Courts that oversee an incapacitated person's assets during his or her lifetime and after death. When an incapacitated person dies, there appears to be little communication between the Supreme Court -- which oversees the guardianship during the incapacitated person's lifetime -- and the Surrogate's Court -- which oversees the incapacitated person's estate after his or her death. Nor does the Mental Hygiene Law clearly delineate the responsibilities of each court. The lack of a requirement to notify the Surrogate's Court of an incapacitated person's death can lead guardianships to fall through the cracks, making it easier for a dishonest guardian to hide his or her embezzlement. In one of Doe's guardianships, it was only because relatives of the incapacitated person inquired of the Office of the Public Administrator about the estate that the incapacitated person's finances were investigated. Without a final accounting to go on, the Public Administrator had to dig deep, finally discovering that well over half a million dollars had been looted from the guardianship account -- nearly half of it after the incapacitated person's death. Doe also stole money after the incapacitated person's death in four other guardianships. Had the Surrogate's Court been apprised of these guardianships and been notified promptly of the incapacitated person's death, Doe's crimes might have been uncovered much sooner and some of the losses prevented.



Currently, nothing in the existing statute or court rules provides for supervision of the court examiners. As a result, there is no way to ensure that the court examiners are properly supervising the guardians. Had there been some check on the court examiners, John Doe's thefts would have been either prevented or discovered much sooner.



No agency to supervise court examiners. Some counties in New York State have an Office of Court Examiner, or a similar agency or officer charged with overseeing court examiners. Queens County, however, has none. The Grand Jury learned from a court official that the Office of Court Administration had, in the past, considered a proposal to use existing employees of the court system as court examiners under the supervision of a court attorney in each county. While budget concerns, unfortunately, apparently foreclosed implementation of this proposal, it should be reconsidered in light of the Doe case. Using full-time court employees as court examiners would provide close supervision over the examination of accountings and would make the entire process more efficient. Unlike the court examiners who are private attorneys with busy law practices who may not have the time to handle the huge volume of examinations for which they are responsible -- in Queens County, an estimated 1,400 to 1,600 initial and annual reports are divided among only ten court examiners -- full-time, court-employed examiners would be able to devote all of their working time to the examination of guardian accountings. Moreover, having full-time court examiners would obviate another problem that a court official identified -- the loss of experienced court examiners because of the recently imposed $50,000 annual compensation cap for court examiners who, once that threshold is reached, may not accept any new appointments.



Inadequate training. At present, according to the testimony of one court official, potential guardians and court examiners take only a one-day training course before their appointment. Given the failures of the court examiners in the Doe case to properly oversee his activities, some of which may have been due to sheer ignorance, more extensive training and continuing education are needed. And, if both guardians and court examiners were required to be re-certified periodically, with re-certification being dependent on past performance and the completion of a refresher course, they would, perhaps, be more diligent in their duties.











When a person is incapable of managing his or her own affairs, the Supreme Court may appoint a guardian for that person. This is routinely done upon the petition of a family member or some other appropriate party, such as a health care facility. Once the petition is filed, the Court appoints an independent "court evaluator" who is usually a private attorney specially trained in guardianship matters. (7) The court evaluator assesses the incapacitated person's condition and assets and then issues a report with recommendations as to whether the person is actually incapacitated and what he or she requires in terms of health care, personal needs and financial management. Upon receipt of the report, the Court is required to hold an evidentiary hearing and, if it finds that the person is incapacitated, appoint a guardian. Mental Hygiene Law 81..09, 81.10, 81.40; Inspector General's Report, Section A; Commission's Report, Section II(A). (8)



In practice, however, according to a court official who testified before the Grand Jury, "it happens too often that there are no evidentiary hearings . . . . Article 81 is a civil rights statute [with] very strict due process procedures . . . and the centerpiece of due process procedures is a full, fair and public hearing at which the [incapacitated person] has every opportunity to be represented by counsel and to defend himself [or] herself against the petition [for guardianship]." Instead, in many instances, the court simply reviews the petition papers and the court evaluator's report, which, the court official testified, is not responsive to the statutory requirement of a guardianship hearing with live testimony.



In general, a family member or a person nominated by the incapacitated person is preferred as guardian. But if there is no such person available, or if circumstances so dictate, the Court may choose a private attorney from a list of court-approved attorneys qualified and trained to serve as guardians. Mental Hygiene Law 81.02, 81.06, 81.39; Inspector General's Report, Section A; Commission Report, Section II(A). (9) John Doe, whose crimes were the impetus for this report, was a private attorney who was appointed to various guardianship under these provisions.



Would-be guardians must attend a one-day training session before being placed on the list of court-approved attorneys. The training session covers the requirements of Article 81 of the Mental Hygiene Law and Part 36 of the Rules of Court, as well as the practical aspects of the guardianship, such as what services the guardian is expected to provide. Guardians must re-register every two years. The Office of Court Administration is considering -- and the Grand Jury would urge adoption of -- a proposal to require additional training as part of the re-registration process.



Within 90 days after appointment, the guardian must file with the Court an initial report. Mental Hygiene Law 81.30. The report must contain, among other things, a verified and complete inventory of the incapacitated person's property and finances, the location of the incapacitated person's will, if any, and the guardian's plan for the management of the incapacitated person's property and finances. Of the many guardianships that John Doe handled over the years, he filed an initial report in only one case, because "[t]hey don't enforce it; why, I can't answer, but I can tell you it's not enforced." A court official explained that "there are delinquencies" in enforcing this requirement and that "Queens should not feel bad, it's not the only county that's doing these things." The initial report is "very, very important", according to a court official, because it gives a baseline for the incapacitated person's assets and is clearly designed to prevent the guardian from hiding assets from the start. Without enforcement of this requirement, there is no safeguard against a dishonest guardian like John Doe. (10) Section 81.32 provides for certain sanctions, such as reduction of compensation or removal of the guardian for failure to file the initial report, none of the court examiners sought these remedies against Doe.



A guardian has only the powers specified in the Court's appointment order. These powers, which are tailored to the particular needs of the incapacitated person, usually include marshaling and overseeing the incapacitated person's assets, paying the incapacitated person's bills, making health care, education and social decisions, deciding where the incapacitated person should live and periodically visiting the incapacitated person, among other things. Mental Hygiene Law 81.20, 81.21, 81.22; Inspector General's Report, Section A. The law specifically charges the guardian with the duty of exercising "the utmost care and diligence" in acting on the incapacitated person's behalf . Mental Hygiene Law 81.20(2). The guardian must "exhibit the utmost degree of trust, loyalty and fidelity" toward the incapacitated person, and must "preserve, protect, and account for [his or her] property and financial resources faithfully" Mental Hygiene Law 81.20(3), (6)(ii).





In addition to their other duties and responsibilities, the guardian must file annual reports with the County Clerk each May or more frequently if the Court so orders. (11) These reports must document the incapacitated person's financial status, including income, assets, expenditures and unpaid claims, as well as the incapacitated person's medical condition and health care status. Mental Hygiene Law 81.31.



Within 30 days of the filing of the annual accounting, it must be reviewed by a "court examiner," who is a specially trained professional -- most often an attorney -- appointed by the Appellate Division of the Supreme Court to oversee the guardianship account. Mental Hygiene Law 81.32(a)(2), (b), 81.41. The court examiner's responsibility is to review "the condition and care of the incapacitated person, and the manner in which the guardian has carried out his or her duties and exercised his or her powers." Mental Hygiene Law 81.32(a)(2). Like guardians, court examiners attend a one-day training session covering Mental Hygiene Law Article 81, Part 36 of the Rules of Court, the obligations of a court examiner and the procedures that he or she should follow in examining initial and annual reports. The training also includes some accounting instruction and the calculation of commissions under New York State's complex formula. A court official who is an expert in guardianships testified that, in his view, this training is not adequate and that the Office of Court Administration is considering proposals to improve it.

There are currently ten court examiners in Queens County. They carry a total annual caseload of some 1,400 to 1,600 initial and annual reports -- about 140-160 cases for each court examiner. In the opinion of a court official who testified before the Grand Jury, a reasonable caseload for a court examiner would be no more than 100 cases per year. Moreover, because of the fiduciary compensation limits that were made part of the Rules of Court in 2002, court examiners who earned more than $50,000 from their examinations in 2003 are ineligible to obtain new appointments in 2004. Currently, two of the court examiners in Queens are ineligible for new appointments. To help close the gap, a new court examiner was appointed in February 2004. A court official testified that, given the court examiners' large caseload, the $50,000 cap is "a little light," because court examiners must be able to handle a high volume of examinations and perhaps hire people to assist them. He suggested that a $75,000 cap would make it more likely that experienced court examiners could be retained for future appointments. But the evidence before the Grand Jury demonstrates that whatever their experience, the court examiners who examined Doe's accountings simply did not do an adequate job.



The statute does not set forth a specific procedure for the examination or a specific form for the guardian's accountings and the examination procedure is not uniform throughout New York State. Nor does the statute set guidelines or requirements for the court examiner's review of the guardian's initial 90-day report. According to a court official, the Office of Court Administration is attempting to develop uniform statewide procedures and forms for the accountings and examinations.



The court examiner may, but is not required to, personally meet with the guardian to review the accounting and may conduct the examination under oath. Mental Hygiene Law 81.32(e). The general practice in Queens County is to conduct the examination under oath and to have the guardian sign and swear to written "testimony." With respect to the incapacitated person's assets, the court examiner is supposed to review the bank statements, checks and other financial documents.



According to John Doe, examinations of the annual reports were rarely performed in a timely fashion. Moreover, as outlined below, examinations were sometimes done in person, sometimes done by mail and sometimes delegated to the court examiner's secretary. Court examiners rarely examined checks or other backup documentation, allowing Doe, in many instances to simply write checks to himself on the guardianship accounts.



If the guardian fails to file the annual accounting or the accounting is incomplete, the court examiner may "demand" that the guardian file an accounting or a revised accounting. Mental Hygiene Law 81.32(c)(1), (d)(1). The court examiner can also move for a court order directing the filing of the accounting, reducing the guardian's compensation and/or removing the guardian. Mental Hygiene Law 81.32(c)(2), (d)(2), 81.35. As detailed below, the evidence before the Grand Jury reveals that on many occasions, Doe failed to file accountings or deliberately filed incomplete or inaccurate accountings, but the court examiners never made the demand or sought the remedies authorized by the statute.



As Doe explained it, each court examiner operates differently in examining the accountings. "Some of them are lazy, and they have their secretaries do it for them, and some of them do it themselves." Although some asked for proof of some of Doe's financial dealings, many failed to examine each transaction. In many instances, Doe wrote checks payable to himself or to cash or wrote blank checks or opened accounts that he never reported. "A lot of those people don't look at the paperwork, they just come in at the end and sign off on them. Basically you come in and meet with their secretary." In some instances, the court examiner never sought to review the annual accounting with Doe. As described below, Doe was able, without being questioned, to transfer to himself over $2 million from fourteen different guardianships during the period from 1997 through 2002 because no one in the guardianship system was adequately reviewing his annual and final accountings.



In addition, the Mental Hygiene Law does not provide for oversight of the court examiners themselves to ensure that they are doing their job. Court officials testified that some counties do have an Office of Court Examiner, or a similar agency or officer charged with overseeing court examiners, but like many aspects of the guardianship process, this is not uniform throughout the state. New York County, for example, has an Office of Court Examiner, headed by a court employee who supervises all court examiner filings and who keeps a database of court examiner appointments and estates. Thus, according to a court official, New York County's Office of Court Examiner "is able to pinpoint the discrepancies." The Appellate Division, Third Department, also has a central office that supervises court examiners. The court official considered such oversight "absolutely necessary." The Office of Court Administration was, in early 2001, considering a proposal that existing employees of the Office of Court Administration, who are auditors, take over the function of the court examiners under the supervision of a court attorney in each county. Unfortunately, the budget crisis of late 2001 resulted in the proposal being tabled.



John Doe in this case was also able to under-report income to various guardianships and take that money for himself. There is no statutory provision or court rule requiring the person or entity that is the source of the income to notify the Court that money is being paid into, or being taken out of, the guardianship account. One court official noted that banks are not "overly cooperative," even when a court order requires notification. Even in Doe's opinion, such notification is "a great idea." The court official also suggested that guardians should not be permitted to withdraw cash from the guardianship account; instead, electronic account-to-account transfers should be required.



The Mental Hygiene Law is also silent as to whether guardian reports and accountings should be audited. A court official was strongly in favor of random forensic audits by auditors employed by the Office of Court Administration.



Finally, there is no requirement in the law that the guardian reside in or maintain an office in New York State. When John Doe moved out of New York State in 2001, he notified the court examiners, but he continued to handle and steal from New York State guardianships and no one sought to have him removed.



When the guardianship ends, most often upon the death of the incapacitated person, the guardian must file with the Supreme Court a final report covering the entire period during which the guardian served. Mental Hygiene Law 81.33(b). The law does not provide a deadline for the filing of this final accounting. John Doe explained that "in Queens County, at least, they're extremely lax about doing final accountings, and actually you can basically just sit on it and not file the accounting." As demonstrated herein, in many cases, Doe failed to file a final accounting after the incapacitated person's death and no one compelled him to do so.



Moreover, it appears that, when a guardian files the final accounting, the court examiner does not review it, because upon the death of the incapacitated person the court examiner's statutory responsibility ends. (12) Instead, the guardian simply sends the final accounting to the Court. According to Doe, "There is nobody who monitors your checks, statements; nobody looks at anything. You can just file your papers with the Court. . . . [T]here is nobody who watches over you, no watchdog agency." Indeed, the statute does not provide for any examination of the final accounting, not even by the Court. A court official testified that some counties require court examiners to examine the final accounting, which is "very, very important," because the court examiner has been reviewing the case from the beginning and is familiar with it, but this practice is not uniform throughout the state. He testified further that in counties such as Queens, where this is not done, "once the ward dies, once the court examiner is out of the picture, well, the case goes into a black hole." This is especially true in cases where the estate is worth less than $100,000.



As outlined below, Doe also drafted wills for two incapacitated persons under his care. Those wills purported to leave the incapacitated persons' estates to Doe who opined that "there is no rule against" a guardian drafting such a will, being the executor and attorney for the incapacitated person's estate and benefitting from the estate. Certainly, nothing in Article 81 of the Mental Hygiene Law or the court rules specifically covers the situation. Doe did, however, admit that it is a "conflict of interest" for an attorney-guardian to be a beneficiary of the incapacitated person's estate. A court official suggested that there should be an absolute prohibition against an attorney-guardian benefitting from the incapacitated person's estate where the guardian is not a relative or pre-existing personal friend of the incapacitated person.









By statute, guardians may be awarded "reasonable compensation" for their services, but the methods by which their compensation is calculated are not uniform throughout New York State. Mental Hygiene Law 81.28; Inspector General's Report, Section A; Commission Report, Section II(A). In Queens County, the guardian's compensation is based on the value of the incapacitated person's assets. For the first $100,000 of the estate, the guardian is awarded 2.5% of the income and 2.5% of the expenditures (a total of 5% of the income and expenditures). The fee is reduced to a total of 4% of the income and expenditures for the next $200,000 and to 3% of the income and expenditures for the next $700,000. The court examiner also receives a fee, paid out of the incapacitated person's assets, as compensation for the examination of the guardianship accountings, to a maximum total fee of $4,000 per examination. Mental Hygiene Law 81.32(f). (13)







John Doe did not have to use any complicated accounting methods to hide his theft of over $2 million from fourteen guardianships. Rather, he was able to simply take the money because he knew that the lack of oversight would let him get away with it. The following are examples of how easily he accomplished those larcenies:



Guardianship No. 1



In this case, Doe was appointed the guardian for an incapacitated person who was mentally incompetent and living in a nursing home. The incapacitated person had inherited over $600,000 from a relative. Doe placed this money in a guardianship account, then simply withdrew the bulk of it and deposited it into his own personal and business accounts. The incapacitated person died before the annual accounting was due for the previous year, but Doe waited several months before notifying the court examiner of the incapacitated person's death. Doe filed neither an annual accounting for the previous year nor a final accounting and no one in the court system sought to have him do so. In an apparent attempt to cover his tracks, Doe drafted a will (with a forged notary signature) for the incapacitated person -- who was clearly not "of sound mind" at the time -- that purported to leave the incapacitated person's entire estate to Doe. Doe's total theft from this guardianship was over $600,000, both before and after the incapacitated person's death.



It was this guardianship that led to the discovery of Doe's thefts. The Office of the Public Administrator, which handles the estates of people who die intestate and without close relatives who can serve as administrator of the estate, looked into the incapacitated person's assets when the incapacitated person's cousins inquired about the estate. The Public Administrator had handled the estate of the relative who had left the incapacitated person over $600,000 and, as the incapacitated person had lived for only another year and a half after receiving that money, it was expected that a large sum would still remain in his bank account. Upon investigation, including review of bank statements, withdrawal slips and canceled checks, the Public Administrator discovered that only about $40 was left, that nearly $300,000 had been paid out of the account after the incapacitated person's death, and that "every single dime" had gone into Doe's personal and business accounts. The Public Administrator thereupon referred the matter to the Chief Administrative Judge of Queens County, who in turn notified the Queens County District Attorney and Doe was indicted.



Guardianship No. 2



This incapacitated person was a quadriplegic living in a nursing home. He received about $1.4 million in a medical malpractice settlement. When John Doe was examined for the year 1997, he reported that his ward had received only $700,000 from this settlement, when he had in fact received the entire $1.4 million. No one questioned Doe as to this discrepancy. And, although there was a Medicaid lien on this incapacitated person's estate and Doe had negotiated a settlement reducing the amount, nothing was ever paid against the lien.



Doe did not file an accounting for this guardianship in 1998. He did file one in 1999, and was examined on it, but in his accounting he reported only four bank accounts when in fact there were nine accounts. (14) Moreover, in his accounting he reported no disbursements when in fact $186,000 was disbursed that year, $107,000 of it to make up a shortfall in Guardianship No. 4 (see below). One annual examination was done by mail, rather than in person. Doe was originally bonded for $1.57 million in connection with this guardianship, but in 1999, the bond was reduced to $843,000.



After this incapacitated person died in 2001, Doe did not file a final accounting and no one asked him to do so. From 1997 through 2002, Doe stole a total of over $800,000 from this guardianship, both before and after the incapacitated person's death. The last check, for $350,000, was deposited into Doe's out-of-state bank account.



Guardianship No. 3



During this brief guardianship, the incapacitated person died shortly after John Doe's appointment as guardian. Doe filed only a final accounting that reported the incapacitated person's total assets as $84,000, but failed to report several assets that were included in the court evaluator's report filed prior to Doe's appointment as guardian. Because of this under-reporting, which was not subject to any oversight, Doe was able to steal $55,000, most of it after the incapacitated person's death, by depositing monies from these hidden assets into his personal and business accounts. Doe noted that, in cases such as this, where there are no family members who had an interest in the incapacitated person's estate and who might ask questions, theft of guardianship funds is particularly easy to accomplish.



Guardianship No. 4



In another brief guardianship where the incapacitated person died soon after John Doe's appointment as guardian, Doe filed a final accounting accurately reflecting total assets of $163,000. What Doe failed to mention, however, was that he had had to appropriate $107,000 from Guardianship No. 2 to make up a shortfall caused by his theft of funds from Guardianship No. 4. No one caught this deception. Doe said that he felt that it was prudent for him to make up the shortfall because there were interested family members involved.



Guardianship No. 5



Even in cases where John Doe duly filed accountings and was examined on them, he managed to steal assets. In this case, for example, in spite of regular annual accountings, Doe stole $91,000 by writing checks on the guardianship account to himself, to cash or by leaving the payee blank and later making the checks payable to himself. These were deposited in his personal and business accounts. But because the court examiners never required a list of check numbers or payees, and apparently never reviewed the canceled checks, the court examiners did not discover these larcenies. Moreover, although the nursing home in which the incapacitated person resided notified the Court that it was not being paid, no one followed up on the allegation.



Guardianship No. 6



The lack of clear rules regarding conflicts of interest also played a role in John Doe's ability to loot guardianship funds undetected. In this guardianship, Doe acted in a triple role -- court evaluator, guardian and estate attorney. (15) As discussed above, a court evaluator's role is to assess the incapacitated person's condition and assets before a guardian is appointed. The guardian's role is to gather and conserve those assets, including items that the court evaluator might have missed. Finally, the estate attorney's role is to ensure that all of the incapacitated

person's assets are collected so that they may be turned over to the incapacitated person's legal heirs. Each is meant to be a check on the other.



As Doe pointed out, however, when someone performs all three roles, "there is no watchdog or anything." In other words, no objective party will be looking at what was done during the guardianship to ensure that all the assets are in the estate. As court evaluator, Doe reported that his ward had $181,000 in liquid assets, plus a home worth $150,000. In his final accounting, as guardian, he reported a total of only $80,000 in assets. Because of the lack of oversight, Doe was able to steal at least $28,000 from this guardianship by writing checks payable to cash or to himself, three of them after the incapacitated person's death. And, upon probate of the incapacitated person's will, there was no objection to the estate because none of the incapacitated person's heirs was aware of the theft.



Guardianship No. 7



This guardianship points up the difficulties under the present statutory provisions and court rules in overseeing the guardian's initial marshaling of an incapacitated person's assets. The court evaluator did not initially locate all the assets. John Doe, when appointed guardian, discovered a trust that made quarterly payments to the incapacitated person. Although, as discussed above, Mental Hygiene Law 81.30 required him to report that trust in an initial report to be filed within 90 days of his appointment, he did not file such a report. Indeed, he recalled filing an initial report in only one case out of the many guardianships that he handled. According to Doe, that statutory requirement was simply "not enforced."



In addition to failing to file an initial report in this case, Doe failed to mention the trust payments at all in his first annual accounting. The following year, he reported only two quarterly payments from that trust when he should have reported four. Doe simply deposited the trust checks in his own account. He was able to do this because banks and other financial institutions are not required by law to report payments to an incapacitated person to any court official. Doe testified that such notification would be "a great idea." Doe also wrote blank checks and checks payable to himself which were deposited in his personal and business accounts. Doe was not examined on either of these annual accountings. In this way, he was able to steal $35,000 from this guardianship.



Guardianship No. 8



As in Guardianship No. 5, John Doe was able to use blank payee checks to steal funds with impunity because the court examiner did not examine the canceled checks when he did examine his accountings and did not demand that accountings be filed when Doe failed to file them. This incapacitated person was afflicted with Alzheimer's Disease and Doe was his guardian for a number of years. In 1997, Doe began stealing funds using numerous blank checks that were later deposited into Doe's personal and business accounts. In his accounting for 1997, Doe listed the payees for these blank checks as various government agencies, when in fact those agencies had not been paid this money and the checks had actually gone into Doe's own bank accounts. Although Doe continued as guardian for this incapacitated person until 2002, court records indicate that he never filed another accounting. The last few checks, written in 2002, just before Doe's arrest, were deposited into Doe's out-of-state bank account after he left New York State. Moreover, although this incapacitated person was mentally incapacitated, Doe prepared a will for him that purported to leave the residue of his estate to Doe to give to charity. In all, Doe stole $272,000 from this guardianship.



Guardianship No. 9



The lack of oversight of accountings is also pointed up by this case. John Doe was appointed guardian for two elderly incapacitated persons who were siblings. He set up a joint guardianship account for them. One sibling died, but Doe never filed a final accounting. He did file an annual accounting for the surviving sibling, which included amounts expended on behalf of the deceased sibling. Although Doe was examined on this accounting, he successfully hid his theft of $23,000 from the joint account through a blank payee check and a check made out to himself. The court examiner in this case did move to remove Doe as guardian for failing to file an accounting in 2000, but, according to documentary exhibits in evidence, the motion was apparently rendered moot when Doe subsequently filed the accounting and was examined on it.







Guardianship No. 10



Delays in examination of the annual accountings were also a factor in Doe's ability to steal guardianship funds. In this case, there was no initial 90-day report and the examination, which was held in 2001, covered two accountings -- for the years 1999 and 2000. It did not, however, uncover Doe's theft of $29,000 through checks deposited into Doe's own accounts and blank payee checks, some of which were written outside the examination period. A review of the 1999 annual accounting reveals that Doe failed to report half of the pension, social security and trust payments due to this incapacitated person. Moreover, he did not specify check numbers for disbursements from the guardianship account. No accounting at all was done for 2001. Doe was finally removed as guardian for this incapacitated person in the Fall of 2002. (16)



Guardianship No. 11



In this case, John Doe was again able to get away with larceny because no one made use of the statutory mechanism to compel him to file an initial report or annual accounting. Doe was appointed co-guardian with the incapacitated person's mother in 2000. He failed to file either an initial 90-day report or an annual accounting. He stole $21,500 from this guardianship by writing one check to himself, and by depositing other checks, made payable to the incapacitated person, the co-guardian, and himself, directly into his own bank account.



Guardianship No. 12



Similarly, John Doe failed to file annual accountings for the last two years of this guardianship. He was able to steal $25,250 from this guardianship without being caught, simply by writing checks payable to himself or depositing checks made out to him as guardian into his personal and business accounts. Nor did he ever file a final accounting. Although there was a motion to remove Doe as guardian, it became moot when Doe was arrested.



Guardianship No. 13



As in Guardianship No. 11, Doe was a co-guardian in this case, but managed to steal $44,000, even getting the innocent co-guardian to co-sign some of the checks that were deposited into Doe's own bank accounts. Doe filed annual accountings for 1996 through 1998, but not for 1999. In the accountings that he did file, several checks were recorded as having been made payable to various entities, but they had in fact been made payable to Doe himself and deposited into his own bank accounts.







Guardianship No. 14



A five-year lapse in accountings occurred in this case. Doe was examined in 2001 for the years 1995 through 1999. The court examiner did not require him to specify check numbers or dates. Doe was able to hide the theft of $23,000 from this guardianship, accomplished through simple withdrawals or checks made out to himself. Although Doe continued as guardian until 2002, he did not file accountings for the years 2000 or 2001.

The case of John Doe makes clear that legislative and administrative changes are essential to provide for the proper oversight of guardians and the protection of the assets of their wards. The recommendations set forth herein are designed to enhance the accountability of guardians through improved notification procedures, strict prohibitions on conflicts of interest and close supervision of court examiners.



The Grand Jury respectfully urges the New York State Legislature to adopt the following proposed statutory amendments:



(1) The Legislature should amend Article 81 of the Mental Hygiene Law to provide that court examiners be full-time employees of the Unified Court System rather than private attorneys or others appointed by the Appellate Division of the Supreme Court.



(2) The Legislature should amend Article 81 of the Mental Hygiene Law to require that a financial institution at which a guardianship account is established:

(a) notify the supervising Court and the court examiner:

(i) whenever a guardianship account is opened;

(ii) of all deposits of over $10,000 made into a guardianship account and their source if known;



(iii) of all debits of over $10,000 to a guardianship account, whether by check, withdrawal or electronic fund transfer, specifying the payee, if known;



(iv) whenever a guardianship account is overdrawn; and



(v) whenever a guardianship account is closed.



(b) submit to the supervising Court and to the court examiner an annual report of all transactions related to the guardianship account.





(3) The Legislature should amend Article III of the Banking Law to provide that, whenever a financial institution is aware that an account holder or beneficiary has been declared an incapacitated person, it must report to the Court and to the court examiner any distributions of over $10,000 made to the incapacitated person and/or to the guardian on behalf of the incapacitated person.



(4) The Legislature should amend Article 81 of the Mental Hygiene Law:

(a) to prohibit a court evaluator from serving as guardian for the same incapacitated person;



(b) to prohibit a guardian from serving as attorney for the incapacitated person's estate;



(c) to prohibit an attorney guardian who is not a family member or personal friend (i.e., a friend prior to the guardianship) from serving as executor for the incapacitated person's estate;



(d) to prohibit an attorney guardian who is not a family member or personal friend (i.e., a friend prior to the guardianship) from benefitting from the incapacitated person's estate; and



(e) to prohibit appointment of an attorney guardian who is not a resident of, or who does not do business in, New York State, except where the guardian is a family member or pre-existing personal friend of the incapacitated person, and to require that an attorney guardian who no longer resides or does business within New York State (1) notify the Court of such fact, and (2) be removed unless the Court finds good cause for the guardian to continue.





(5) The Legislature should amend Article 81 of the Mental Hygiene Law to require that the guardian notify the court examiner within five days of the incapacitated person's death.



(6) The Legislature should amend Article 81 of the Mental Hygiene Law to require:

(a) that the guardian submit a final accounting within 30 days of the incapacitated person's death;



(b) that the final accounting be examined by the court examiner within 30 days of its submission;



(c) that the final accounting, after examination, be sworn to by both the guardian and the court examiner before submission to the Court;



(d) that the final accounting be promptly reviewed and audited by the Court, with the power to hold a hearing if necessary;



(e) that the Court, after such review, promptly issue an order either approving the final accounting or directing its modification, as appropriate; and



(f) that if the Court orders modification of the report, the court examiner shall remain responsible for examining the modified report.





(7) The Legislature should amend Article 81 of the Mental Hygiene Law to require that removal proceedings against guardians who do not conform to the filing requirements of Article 81 be initiated and prosecuted expeditiously and to provide for civil penalties in addition to removal or reduction of compensation.



B. Administrative Recommendations



The Grand Jury respectfully recommends that the Chief Judge of the State of New York after consultation with the Administrative Board of the Courts and with the approval of the Court of Appeals adopt the following proposed amendments to the Rules of Court, 22 N.Y.C.R.R. Part 36:



(1) The Rules of Court should be amended to provide that the court evaluator's initial marshaling of assets should be done with the aid of financial subpoenas, credit reports and other financial checks so that an accurate picture of the incapacitated person's financial status can be obtained before the guardian is appointed.



(2) The Rules of Court should be amended to provide that the court examiner be required to ensure that the guardian promptly files the initial 90-day report pursuant to Mental Hygiene Law 81.30. The court examiner should be required to review the initial report carefully in conjunction with the court evaluator's report. The guardian should be required to submit to the court examiner for his or her review, a sworn and detailed explanation of any inconsistences or discrepancies between the court evaluator's report and the guardian's initial 90-day report.



(3) The Rules of Court should be amended to require the guardian to document, as part of the initial 90-day report, all financial arrangements between the guardian and Medicaid, including liens and settlements.



(4) The Rules of Court should be amended so that the procedure by which court examiners conduct examinations of guardian accountings are made uniform state-wide, as follows:

(a) court examiners should be required to examine canceled checks written on guardianship accounts and compare them carefully to the bank records;



(b) court examiners should be required to carefully question, and guardians should be required to explain in writing, any cash withdrawals, checks made payable to cash or checks made payable or endorsed to the guardian;



(c) examinations of attorney guardian accountings must be performed personally by the court examiner in the presence of the guardian, who should be placed under oath when the examination begins;



(d) examinations by mail of attorney guardian accountings should be prohibited; and



(e) court examiners should be prohibited from delegating the examination to another person, except, in the event that the court examiner is unable to perform the examination expeditiously, to another duly appointed court examiner.





(5) The Rules of Court should be amended to provide that an independent auditor must regularly spot-check guardian reports and accountings, including the initial report, the annual accounting and the final accounting. This audit should be performed randomly by an independent forensic accountant or auditor.



(6) The Rules of Court should be amended to require that the questionnaire that accompanies the annual accounting provide for specific information regarding the financial assets of the incapacitated person, including details regarding all transactions, and its format should be uniform throughout the state.



(7) The Rules of Court should be amended to require that guardians and court examiners use accounting software so that the examination process can be expedited, and so that past, present and future financial reports can be easily compared and audited.



(8) The Rules of Court should be amended to require that a guardian appointed for more than one incapacitated person in the same family keep separate accounts for each incapacitated person.



(9) The Rules of Court should be amended to enhance coordination between Surrogate's Court and the Supreme Court regarding guardianships, as follows:

(a) the Supreme Court should provide a list of all guardianships to the Surrogate's Court, updated quarterly;



(b) upon being notified of an incapacitated person's death, the court examiner should also promptly notify the Supreme Court, the Surrogate's Court and the Office of the Public Administrator; and



(c) upon Supreme Court approval of the final accounting, the court examiner should file a copy of said accounting with the Surrogate's Court.





(10) Until such time as the Legislature amends Article 81 of the Mental Hygiene Law to provide that court examiners be full-time employees of the Unified Court System, the Chief Judge should establish a Statewide Office of Chief Court Examiner as an arm of the Court to supervise each county's court examiners, review their examination procedures and seek removal or other penalties for any failure to conform to the requirements of the Mental Hygiene Law or the applicable Rules of Court.



(11) The Rules of Court should be amended to require that guardians and court examiners be periodically re-certified based on past performance and the satisfactory completion of additional training, as determined by the Office of Chief Court Examiner.

A brazenly dishonest guardian, neglectful court examiners and a guardianship system riddled with loopholes led to the theft of over $2 million from the estates of vulnerable victims who relied on that very system to protect them. The Grand Jury believes that legislative and administrative action is urgently required to address the many serious problems that the case of John Doe has so pointedly illustrated.



For this reason, the Grand Jury has recommended that existing accounting provisions of the Mental Hygiene Law be more strictly enforced; that notification requirements be put in place to ensure communication between guardians and examiners, between financial institutions and the Court and between the Supreme Court and the Surrogate's Court; that conflicts of interest be specifically addressed and prohibited; that uniform procedures for the examination of guardian reports and accountings be promulgated; and that remedies for the failure to adhere to proper accounting and examination procedures be strengthened and enforced.



Moreover, the Grand Jury has recommended that court examiners be full-time employees of the Unified Court System rather than private attorneys or others appointed by the Appellate Division of the Supreme Court and that until such recommendation is enacted into law the Chief Judge should establish a Statewide Office of Chief Court Examiner as an arm of the Court to supervise each county's court examiners, review their examination procedures and seek removal or other penalties for any failure to conform to the requirements of the Mental Hygiene Law or the applicable Rules of Court.



The Grand Jury urges that these proposals be acted upon promptly.



*******************************************



We, the Grand Jury of the Supreme Court, State of New York, County of Queens, pursuant to the provisions of Criminal Procedure Law 190.85(1)(c), submit this Report

recommending, based upon our stated findings, legislative and administrative actions in the public interest.





______________________________________

Foreperson





Dated: Kew Gardens, New York

February , 2004



APPENDICES





Definitions



New York Mental Hygiene Law, Article 81



New York Rules of the Chief Judge, Part 36

DEFINITIONS





Guardianship Petition: A petition filed by someone - a relative, friend, or health-care facility - who believes that a person may be incapable of managing his or her affairs and needs a guardian to do so. Mental Hygiene Law 81.02, 81.06 and 81.08.



Incapacitated Person: A person whom the Supreme Court has declared to be incapable of managing his or her affairs. Mental Hygiene Law 81.02(b).



Court Evaluator: A professional appointed by the Supreme Court, after a guardianship petition is filed, to marshal a potential incapacitated person's assets and evaluate his or her mental and physical condition, in order to assist the Court in determining whether the person needs a guardian and, if so, what assets the guardian needs to manage. Mental Hygiene Law 81.09.



Guardian: A person appointed by the Supreme Court to manage the incapacitated person's affairs. A guardian may be a relative or friend of the incapacitated person, or may be a private attorney chosen from a list of Court-approved guardians. Mental Hygiene Law 81.03(a).



Court Examiner: An attorney appointed by the Appellate Division of the Supreme Court to examine the guardian's initial report and annual accounting of his or her activities and financial transactions on behalf of incapacitated person. Mental Hygiene Law 81.32.

1. In accordance with grand jury secrecy rules (C.P.L. 190.25[4]), the attorney's true name is not used in this report. For the same reason, no other person connected with this matter is named in this report.

2. Article 81 of the New York Mental Hygiene Law provides for the appointment of a guardian for an "incapacitated person," i.e., a person who is unable to provide for his or her own personal needs or to manage his or her property and finances. See Mental Hygiene Law 81.02(a).

3. Due to public concerns about certain lawyers and law firms receiving an inordinate share of guardianship appointments, the Chief Judge of the State of New York in 2002 promulgated new court rules limiting such appointments. These rules also require judges who approve compensation above certain amounts to give written reasons for doing so. See 22 N.Y.C.R.R. Part 36 (as amended April 10, 2003). The rules do not, however, address the loopholes in the court examiner system that allowed Doe to steal millions of dollars from his wards. The Grand Jury's recommended changes to the statutes and court rules governing guardianships will serve to fill those gaps to deter such thefts in the future.

4. As explained more fully below, the Court assigns a court evaluator to marshal a potential incapacitated person's assets, among other things, before the Court appoints a guardian.

5. The apparent failure of bank personnel to notice the manner in which these checks were drawn further aided Doe's scheme.

6. The scope of this Grand Jury Report is limited solely to guardianships within the purview of Article 81 of the New York Mental Hygiene Law. Moreover, this Grand Jury Report examines only the oversight process that occurs after the guardian has been appointed. It does not discuss, except as background, the initial appointment process.

7. Some court evaluators may be psychiatrists, social workers, nurses or accountants, but most often attorneys are appointed.

8. Although it was a clear conflict of interest, in at least one case John Doe served as court evaluator, guardian and estate attorney for the same incapacitated person. As Doe himself explained, this was a conflict because the court evaluator is "the eyes and ears of the Court" with respect to the incapacitated person's assets. Obviously, it might be in the interest of an unscrupulous court evaluator who hopes to serve as a guardian to hide assets that he could plunder later. This is precisely what Doe did in that case, stealing $28,000 from the incapacitated person's estate. This conflict of interest was identified in the Commission Report and addressed in the recent amendments to the court rules for court appointments, which now prohibit a court evaluator from serving as guardian in the same case unless there are "extenuating circumstances." 22 N.Y.C.R.R. 36.2(c)(10) (as amended April 10, 2003); see Commission Report, Section III(C).

9. Where appropriate, the Court may also choose to appoint a community guardianship program to act as guardian. Mental Hygiene Law 81.19(a)(2). About 80% of guardianship appointments in New York State are of family members or friends of the incapacitated person.

10. The Court may require the guardian to file a bond before entering upon his duties. Mental Hygiene Law 81.25. John Doe was bonded and the bonding company ultimately reimbursed his victims or their estates.

11. In the Second Judicial Department, which includes Queens County, accountings for estates worth less than $50,000 must be filed every two years.

12. As a result of the Doe case, court examiners in Queens County are now required to notify the Office of Public Administrator when an incapacitated person dies.

13. In the Fourth Judicial Department, the court examiner fee cap is $500 per examination.

14. A forensic accounting expert testified that, in his opinion, Doe opened a large number of accounts in order to shift and hide funds, making them difficult to trace.

15. Under the recently amended court rules, a court evaluator may not also serve as guardian. 22 N.Y.C.R.R. 36.2(c)(10) (as amended April 10, 2003); see Commission Report, Section III(C).

16. Doe was arrested shortly thereafter.