With every slip and fall, every bruise and ache, the reality set in: Henry Schaffer, 86, could no longer live on his own. So his daughter, Kristi, began searching for a retirement home — and the money to pay for it.

At Aspen View, a senior living complex in Billings, Mont., a lawyer accredited by the Department of Veterans Affairs delivered what seemed like good news: Mr. Schaffer, a World War II veteran, could probably qualify for a generous V.A. benefit. For a few thousand dollars, the man would help veterans like Mr. Schaffer get one.

“My dad kept on asking me, ‘Don’t you think this is too good to be true?’ ” Ms. Schaffer recalled. To assure him, she pointed to the lawyer’s V.A. credentials.

It was only after Mr. Schaffer had moved in that they learned the truth: He did not qualify at all. Ms. Schaffer says her father now worries that he will be evicted. He can afford only about half of his monthly bill.

The benefit, known as the Veterans Pension program, can be worth more than $20,000 a year to war veterans who are disabled or over age 65. But it is open only to those with an annual income of less than $12,465 for a veteran with no dependents — and Mr. Schaffer collects more than that in Social Security.

More money is available for veterans who are unable to cook or bathe on their own, but Mr. Schaffer, while he needs some help, didn’t qualify for that, either.

As baby boomers head toward retirement — worrying not only about their financial futures, but also their parents’ — a cottage industry has sprung up around the pension program.

Lawyers, financial advisers and insurance brokers have formed a lucrative alliance with retirement communities and assisted living facilities to extract many billions of taxpayer dollars from the V.A., according to interviews with state and federal authorities, as well as a review by The New York Times of hundreds of legal documents and client contracts.

Questionable actors are capitalizing on loose oversight to unlock the V.A. money and enrich themselves, sometimes at veterans’ expense. The V.A. accreditation process is so lax that applicants provide their own background information, including any criminal records. But the V.A. has only four full-time employees evaluating the approximately 5,000 applications that it receives annually. Once people get the V.A.’s stamp of approval, they rarely lose it, even if a customer complains or regulatory actions mount. Last year, the V.A. revoked its accreditation for two of its more than 20,000 advisers.

Some advisers sell financial products like annuities and trusts that are meant to mask veterans’ assets or income — arrangements can tie up family money for years or even decades. Others circumvent V.A. rules and charge hundreds or even thousands of dollars for advice that may — or may not — help veterans qualify. Still others offer to train lawyers and advisers about the workings of the V.A.

Echoes of Past Cases

The development recalls the array of questionable business practices involving seniors and Medicaid. Indeed, many of the firms that zeroed in on those programs in the past have recast themselves as V.A. specialists. More than 200 firms nationwide now focus on V.A. retirement benefits, according to the Government Accountability Office.

The V.A. accreditation allows someone to prepare benefits applications on veterans’ behalf. In theory, federal rules ban these advisers from charging for that service. In practice, elder-care lawyers say, many get around the rules, win veterans’ trust and then pitch costly products and services.

“The agency needs to take a closer look at who they are accrediting,” said Daniel Bertoni, the director of disability issues at the Government Accountability Office, which issued a critical report on the V.A. in August. “It gives the air of a stamp of approval from the agency that has been paying their checks for many years.”

Randal Noller, a V.A. spokesman, said the agency planned to review advisers’ training materials and perform more robust background checks “as necessary.”

“We realize there are some areas in the program that we could improve to ensure that individuals who obtain and maintain V.A. accreditation are qualified,” Mr. Noller said.

And based on the accountability office’s recommendations, the V.A., Mr. Noller said, has already begun enacting fixes to its program. Among them, the V.A. will more robustly verify seniors’ financial information and change applications to spot veterans who have disguised their assets in order to qualify.

For the advisers and retirement homes, the attractions are clear. The V.A. program paid $5.1 billion to 514,000 veterans or their survivors this year, up from $3.4 billion in 2007, according to the Department of Veterans Affairs. The number of veterans or their spouses receiving the aid and attendance benefits, the stipend for assisted living, has surged by 30 percent — leaping to 206,000 in 2012, from 158,000 in 2006.

Holding out the prospect of the V.A. benefit can mean the difference between a vacancy and a paying customer — an advantage that V.A. specialists trumpet in advertisements. “Recession proof your law practice,” Academy of VA Pension Planners, of Roswell, Ga., says on its website.

Yet some warn that the V.A. program, which is meant to help the poorest veterans, will be strained as a growing number of seniors are steered toward it.

Without changes, the program is a “magnet for rip-offs and waste,” Senator Ron Wyden, Democrat of Oregon, said during a hearing convened last year by the Senate’s Special Committee on Aging.

The goal is often to coax seniors like Mr. Schaffer into paying for services or investments and, in the process, signing contracts that lock them into long-term living arrangements, according to elder-care lawyers and interviews with more than three dozen veterans. The veterans spoke on the condition that they not be named because they did not want their financial problems made public.

While many veterans — technically eligible or not — secure the benefit, others do not. And if a benefit fails to materialize, the financial consequences can be catastrophic.

“When I die, I am going to be buried as a pauper,” said Harvey Schneider, 78. Mr. Schneider, a Korean War veteran, said he moved to Windlands South, a senior complex in Nashville, after being told that he would qualify for the V.A. benefit. He did not, and now owes more than $17,000 to Holiday Retirement, the national chain that operates Windlands South and 300 other complexes around the country, including Aspen View.

Holiday Retirement, which is controlled by a large private investment company, says it no longer allows veterans specialists to host benefit seminars at its facilities.

“Holiday has a longstanding commitment to honoring and supporting veterans,” said Jamison Gosselin, Holiday’s vice president for marketing. He said that Holiday, which is “home to more than 120,000 veterans and surviving spouses,” donated $1.2 million to an Outward Bound veterans program last year, with another $1.2 million pledged this year.

Finding a Home

At Aspen View, rent runs about $2,800 a month, excluding extras. That put Aspen View out of reach for Mr. Schaffer, who receives about $1,600 a month in Social Security, his daughter, Kristi, said.

But in early 2011, Douglas Ocker stood in the facility’s airy dining room wearing a Hawaiian shirt and explained to the Schaffers and other prospective residents how they might afford a place like Aspen View: the V.A. benefit. Mr. Ocker, a lawyer in Corpus Christi, Tex., often charges nearly $4,000 for his services, according to a review of client contracts.

While Ms. Schaffer acknowledges that Mr. Ocker gave no assurances that her father would qualify, she said his accreditation by the V.A. swayed the family to let her father move in. She said her father blamed her for his financial straits; the two are not on speaking terms. Mr. Schaffer declined to comment for this article.

“I don’t fall for this kind of thing,” Ms. Schaffer said. But of Mr. Ocker she said: “he was blessed by the department,” meaning the V.A.

Mr. Ocker did not return telephone calls and emails seeking comment.

Banking on a Benefit

Across the country, state officials say, there are hundreds of veterans just like Mr. Schaffer — older Americans vulnerable to financial players who hold out the V.A. benefit as an answer to myriad economic worries.

Many firms seem to promise that they will secure benefits for people whose income would otherwise make them ineligible, state authorities say. Many of the financial products they pitch fall into a gray area in the Veterans Pension program.

Under the current rules, the V.A. does not have the explicit authority to reject veterans who transfer or disguise assets before applying. By contrast, Medicaid and other federal programs aimed at helping the poorest Americans have a so-called look-back provision to guard against such financial sleight of hand. Transferring assets to qualify for V.A. benefits, while technically legal, can choke off Medicaid and other supports seniors might need, financial planners warn. For its part, the department says it supports legislation that would enact a look-back provision.

“Nationwide, there should be widespread alarm that a growing number of veterans are being scammed and manipulated,” said Terry Schow, who retired as the director of the Utah Department of Veterans Affairs earlier this year.

Many of the supposedly asset-shielding maneuvers make little sense for seniors. In some cases, people in their 70s or 80s can lock up money in trusts or annuities for 20 years or more. If they die, the assets remain out of reach to their spouses and families.

Other firms profit by charging hefty fees. One Nashville law firm charges a “pre-filing consultation fee” of about $700. Mr. Ocker, the Texas lawyer, charged one client $3,247 in legal fees, according to a copy of a contract which said, “filing of the application with V.A. office (no charge).” Others charge a percentage of any monthly pension benefit that a veteran receives, according to copies of confidential customer contracts reviewed by The Times.

Every veteran that can qualify for a benefit represents another potential customer for retirement communities, a fact V.A. benefit specialists emphasize in marketing materials.

On its website, Veterans Financial, of Villanova, Pa., says that “free educational workshops” can be a critical element to “increase and maintain resident census.”

Emphasizing its success, the company says: “we have had more than 40,000 attendees at our workshops throughout the United States.” The Academy of VA Pension Planners, the Georgia firm, puts it more bluntly: “The financial benefit to your potential clients and residents helps your facility keep occupancy near or at 100 percent.”

The firms did not respond to requests for comment.

Holiday Retirement, the owner of Aspen View and Windlands South, has received complaints about its practices. In August, three elderly war veterans sued the company in Oregon state court, accusing Holiday of misleading them about the pension “as part of a scheme to increase occupancy rates and rental income.”

The suit, which is pending, claims the veterans learned that they would not qualify only after they moved in. In September, Holiday Retirement agreed to pay up to $3,500 to 163 veterans after Oregon accused the company of misleading the veterans about the pension benefit.

Empty Promises

Back in Nashville, Mr. Schneider said he had lost almost everything.

He said he was assured by a Holiday representative that he would quality for the V.A. benefit, prompting him to leave his trailer home in Florida and move to Tennessee, where he has family. His share of his first month’s rent, for January 2012, was $875, according to a copy of his contract. Mr. Schneider said he was assured that his contribution would shrink to approximately $40 a month once his V.A. benefit kicked in.

It never did.

“We denied your claim for pension benefits,” the V.A. informed Mr. Schneider in a letter dated Oct. 12, 2012. Mr. Schneider has since moved out of Windlands South. He is living alone in a small apartment.

“They did me wrong,” he said, “after everything I tried to do for my country.”

<nyt_headline version=”1.0″ type=” “>Loans Borrowed Against Pensions Squeeze Retirees

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By JESSICA SILVER-GREENBERG

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The pitch arrived, as so many do, with a friendly cold call.

Bruno Koch, 83, told the telemarketer on the line that, yes, of course he would like to update his health insurance card. Then Mr. Koch, of Newport News, Va., slipped up: he divulged his bank account information.

What happened next is all too familiar. Money was withdrawn from Mr. Koch’s account for something that he now says he never authorized. The new health insurance card never arrived.

What is less familiar — and what federal authorities say occurs with alarming frequency — is that a reputable bank played a crucial role in parting Mr. Koch from his money. The bank was the 140-year-old Zions Bank of Salt Lake City. Despite spotting suspicious activity, Zions served as a gateway between dubious Internet merchants and their marks — and made money for itself in the process, according to newly unsealed court documents reviewed by The New York Times.

The Times reviewed hundreds of filings in connection with civil lawsuits brought by federal authorities and a consumer law firm against Zions and another regional bank that has drawn even more scrutiny, First Bank of Delaware. Last November, First Delaware reached a $15 million settlement with the Justice Department after the bank was accused of allowing merchants to illegally debit accounts more than two million times and siphon more than $100 million.

The documents, as well as interviews with state and federal officials, paint a troubling picture. They outline how banks profit handsomely by collecting fees while ignoring warnings of potential fraud and, in some instances, enabling dubious merchants to prey on consumers.

Anyone, young or old, can be targeted by unscrupulous marketers. But for several reasons — financial worries, age, loneliness — older people are particularly vulnerable to what is known as mass market fraud, deceptive pitches that arrive by telephone, mail and the Internet.

The problems at Zions and First Delaware, where the banks became financial conduits and quiet enablers for questionable businesses, extend well beyond those two institutions, federal authorities say. Indeed, banks across the country, from some of the largest to smaller regional players, help facilitate billions of dollars of fraud each year, according to interviews with consumer lawyers and state and federal prosecutors.

Officials at the Justice Department say they are taking aim at banks’ role in giving predatory lenders and fraudulent merchants access to the United States financial system. The department is considering civil and criminal actions against a number of banks for allowing tainted money to flow through branches, for failing to safeguard against suspicious merchants, and for originating transactions on behalf of businesses that they know make unauthorized withdrawals from customer accounts, according to people with direct knowledge of the matter.

“You can’t close your eyes anymore to the fraud that you are allowing to happen,” said Michael Blume, the director of the consumer protection branch at the Justice Department. “Banks are in business to make a profit. Unfortunately, this is a moneymaking operation at consumers’ expense.”

Zions did not interact directly with the company that called Mr. Koch, National Health Net Online. What the bank did was establish a banking relationship with an intermediary, Modern Payments, that handled payments for National Health. Mr. Koch’s account at a small Virginia bank was debited by National Health, which in turn paid Modern Payments for processing the transaction. Modern Payments gave its bank, Zions, a cut of its fee.

In all, Zions in effect let roughly $39 million be withdrawn from hundreds of thousands of accounts from 2007 to 2009. Much of that money was ultimately transferred to bank accounts in Canada, India and the Caribbean, according to a Times review of court records. Many of the Internet merchants’ customers were older people and others on shaky financial footing. But that, too, worked in banks’ favor: the withdrawals set off a cascade of insufficient fund fees — more than $20 million in all, court records show.

“Zions takes seriously the need to prevent the banking system being used for fraudulent purposes; however, it is our general policy not to comment on pending legal matters,” said James R. Abbott, director of investor relations for Zions. “There is another side to this story, other than that told by the plaintiff. Our side of the story will be told at the appropriate time through the legal system.”

A spokesman for First Delaware declined to comment. Neither National Health Net Online nor Modern Payments responded to e-mails and telephone messages.

Mr. Koch, a retired teacher, said that he was usually skeptical of telemarketers. But when his phone rang one afternoon in November 2007, he recalled, he listened as the caller identified himself as a Medicare official and suggested that Mr. Koch update his health insurance card. Mr. Koch, as requested, supplied his bank information.

But instead of a new insurance card he received notice that he had been enrolled in National Health Net Online’s discount health plan. The company had withdrawn $299.95 from his bank account as payment, according to records reviewed by The Times.

National Health, a unit of NHS Systems Inc. of Collegeville, Pa., has a troubled history. In April, the Federal Trade Commission permanently banned the company from telemarketing and ordered it to pay a $6.9 million fine after accusing NHS Systems of defrauding consumers. NHS Systems did not return multiple telephone calls seeking comment.

“I was so angry,” Mr. Koch recalled. He demanded a refund from NHS Systems but was not reimbursed.

Between 2007 and 2009, tens of thousands of Americans, many of them over age 65, lodged complaints with state attorneys general, banking regulators and the F.T.C., requesting refunds for bank charges that they say were unauthorized, according to court records.

Lawyers at Langer, Grogan & Diver sued Zions, representing several hundred thousand consumers who said that NHS Systems and other telemarketers took money from their accounts without authorization. The lawsuit, which is pending in a federal court in Pennsylvania, claims that Zions effectively gave “fraudulent marketers direct access to every bank account in the United States.”

According to internal e-mails and other documents filed in connection with that suit, Zions bankers recognized something was amiss early on. An outsize number of customers were disputing payments to certain processors. The rates of return — that is, the percentage of payments that are returned for insufficient funds and lack of authorization — stood out. “WOW,” one Zions officer wrote in an e-mail after seeing the numbers.

Others inside Zions raised alarms, too. Zions executives told colleagues that the high return rates were a troubling sign. In January 2007, one warned that the rates were “staggering.” In 2007, more than half of the payments that one Internet merchant was routing through Zions were bounced back — roughly 40 times the industry standard.

Reviewing complaints about one Internet merchant, a Zions vice president wrote, “Every red flag possible went off in my head.”

And yet the bank kept handling the transactions, court records show. Why? One payment processor executive suggested an answer: the business was a gold mine.

“Turning them off and sending them somewhere else is not an option,” this executive told Zions in an e-mail in September 2007.

Officials at the F.T.C., the Justice Department, the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation say this is just the tip of the iceberg, according to people with knowledge of the matter.

In a move that prosecutors say is a harbinger, the United States attorney in Philadelphia sued the First Bank of Delaware in November, claiming the bank effectively abetted “fraudulent Internet and telemarketer merchants,” court records show. The bank, the lawsuit claims, stayed “willfully blind” to the fact that the merchants were illegally taking money from customers, including a disproportionate number of seniors, through “fraud, trickery and deceit.”

Like Zions, First Delaware dealt with intermediaries rather than directly with the merchants.

But as Zane David Memeger, the United States attorney in Philadelphia, said in the lawsuit against First Delaware, bad actors “must access the banking system to gain access to the consumer’s money.”

At First Delaware, return rates for some merchants exceeded 80 percent. Yet the more questionable the merchant, the more fees a bank stands to collect, prosecutors say. Every time victims flag an unauthorized charge and demand money back, banks collect fees to process the return. Those fees are far larger, according to banking documents, than the ones charged for processing the original transactions.

First Bank of Delaware anticipated that revenue from its processing business would swell by more than 1,300 percent, from $150,000 in 2010 to roughly $2 million a year later, court records show.

Bradly D. Swartz, of Meshoppen, Pa., learned firsthand how much such practices can cost consumers. Mr. Swartz, 59, was trying to stretch his retirement savings when a telemarketer called in 2007 with what sounded like good news: Mr. Swartz had won a prize. All he had to do to collect was fill out a money order.

Then, starting in 2007, Mr. Swartz said, a subsidiary of NHS Systems — the same company that Mr. Koch had dealt with — started withdrawing $19.95 a month from his checking account. After emptying the account, National Health referred him to a debt collector, Mr. Swartz said.

Mr. Swartz said his credit was ruined. He now works part time at Walmart to supplement his savings.

“I have to work until the day I die, and these greedy banks just profit,” he said.

Federal officials say banks not only must know their customers, but also their customers’ customers in order to ensure that consumers in general, and older Americans in particular, are not at risk. The First Delaware case, they say, is a warning to the industry.

“Nothing sharpens the focus for banks like an enforcement action,” said Michael Bresnick, the director of President Obama’s Financial Fraud Enforcement unit.

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