Thursday, June 25, 2015

Lawyer guilty of securities fraud against elderly

By Greg Wright, 
MBA, CFE, CFP®, CLU, ChFC
Certified Fraud Examiner
Certified Financial Planner™


Charles Blackwelder Mug Shot
Indianapolis lawyer, Charles B. Blackwelder, age 70, was recently suspended from the practice of law following being held guilty of four felony counts of securities fraud. 

Blackwelder and his daughter Cara Grumme sold $10.4 million of undivided real estate interests to over 300 elderly citizens.   The investments were marketed as being designed to shield their assets from consideration in determining their eligibility for Medicaid. 

Elderly citizens often incorrect believe that, to qualify for Medicaid or nursing home benefits, they should move assets out of their own name and into the names of their children or loved ones. However, the regulations are complicated, and there can be serious problems inherent in such an asset transfer strategy.   For example, regulations governing Medicaid eligibility provides for a “look back” period of 36 months, or in the case of transfers to a trust 60 months. 

Citizens with some knowledge of the “look back” rules often consult a trusted attorney, CPA or estate planner.  Mr. Blackwelder, a long-established attorney, and his daughter marketed their real estate investments as a means to legally shield their elderly client’s assets from consideration in determining their Medicaid eligibility.

Cara Brumme Mug Shot
Charles Blackwelder, daughter Cara Grumme, and son Chad Blackwelder owned CFS Inc, located in the Village of West Clay in Hamilton County.  The company had taken in a total of over $23 million during the previous ten years.  Charles Blackwelder was an attorney and a licensed real estate broker.  Cara Grumme and Chad Blackwelder had real estate licenses that expired in 2010. 

According to court records, CFS sold $10.4 million in ownership interests in rental properties to 300 investors designed to avoid the Medicaid step down requirements.  That real estate portfolio contained 35 commercial and residential properties valued at $7.1 million. 

Some of the properties had received foreclosure notices.  The building in West Clay that houses CFS’s office, according to published sources, had lost several major tenants preventing it from having sufficient cash to pay its mortgage payments and investors.  According to the Secretary of State, “Neither Blackwelder nor Grumme informed investors that their properties had been sold prior to their purchase or the foreclosures had already been filed on several properties.  Additionally, Blackwelder and Grumme were using several of the properties for their own personal use.”

The Indiana Secretary of State determined that CFS’s real estate interests were in fact securities.  Former Securities Commissioner Maddox, not involved in the case, agreed.  The Secretary of State deemed some the sales a Ponzi scheme designed to fund prior obligations.

Charles Blackwelder pled guilty to securities fraud and is to serve four years in prison.  Grumme pled guilty to felony perjury and was ordered to serve three years of probation.  Blackwelder and Grumme are both ordered to pay $19,379,104  in restitution to the victims. 

 

3 comments:

  1. First offender females that have male accomplices rarely get jail time in white-collar crimes. Even when sentenced, they get less jail time than their male accomplice. Maybe this is because most of the judges are old men that do not understand females with Anti-social Personality Disorder.

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