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Fraud victim fund hands out less than 1% of holdings

Boaz Yiftach/freedigitalphotos.net

A state fund meant to compensate victims of corporate fraud has given out less than 1 percent of its holdings since its inception nearly a decade ago and has denied or made no decision on all but six claims, records show.

The Victims of Corporate Fraud Compensation Fund, operated by the secretary of state’s office, was created in 2003 to give restitution to fraud victims. A portion of the annual filing fee for state corporations goes into the fund. The fund is currently valued at about $14.3 million – although $10 million has been set aside to balance the state budget – and has handed out $92,500 in restitution, according to the Secretary of State's Office.

Although the fund has received 675 claims, it has only paid on six of them, or about 1 percent.

The state is currently handling its largest-ever set of claims for payments, with nearly 500 victims of an alleged “senior financial counseling” scam seeking cash. So far, the secretary of state’s office has taken the position that all 500 claimants should be treated as one person, entitling them to split the maximum payout of $20,000 into $40 increments. The problem with that solution, according to Sacramento attorney Mark Redmond, is that the victims each lost thousands of dollars.

“It’s hard to imagine a victims' restitution fund that has given away half of 1 percent is living up to the intent the Legislature had for it and (the obligation) to all the corporations that are paying into the fund,” said Redmond, who represents the nearly 500 seniors currently seeking restitution. “It’s just amazing.”

Redmond represents seniors who gave thousands of dollars to James Walker, a former attorney who operated Sacramento-based Senior Care Advocates and offered estate-planning services.

According to a settlement [PDF] with the state attorney general’s office, Walker intentionally made “untrue and misleading statements” to seniors. Redmond said Walker advised seniors to give away all of their assets in order to qualify for Medi-Cal, which pays for nursing home care for those with incomes low enough to qualify.

Walker’s advice, which cost many seniors about $10,000, essentially prodded elders to defraud the government.

Redmond said his clients are being asked by the secretary of state to essentially re-prove their case to qualify for funds, even though the Department of Justice described Walker’s scheme as “deceptive” and a bankruptcy judge said it met the definition of “fraud.”

California Watch recently detailed the operation of another state victims fund – for those who are wrongly convicted of crimes – that requires recipients to re-prove their innocence. Only 11 of 132 people who have sought restitution from that fund have been compensated, even though some were found factually innocent in state court.

Shannan Velayas, a spokeswoman for the secretary of state’s office, said the decision is still pending about how to compensate the nearly 500 victims seeking restitution for fraud related to the Senior Care Advocates case.

Aside from the claims from Redmond’s clients, the fund has received about 175 claims for funds, about 100 of them in the last two years. Of those, the fund has paid on six claims, handing out about $92,500.

Velayas said about $10 million of the fund’s $14.3 million in holdings was borrowed to help balance the state budget. However, she said, the secretary of state’s office can go to the Legislature for clearance to tap needed funds.

Overall, she said, the fund has received a relatively limited number of claims and has no budget to advertise or market the availability of compensation for those who have been defrauded.



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Charlie Peters's picture
I'm confused about funds transferred to the general fund. Should a California Grand Jury investigate? Does California have an Attorney General? How do you spell fraud?

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