Ruth Rootenberg, a 92-year-old client, has filed a lawsuit against Charles Schwab, claiming the firm failed to protect her from a scam that resulted in her losing $278,000—much of it in gold bars. Rootenberg, who fell victim to a sophisticated impersonation scam between February and April 2024, argues that Schwab ignored multiple red flags, including suspicious transactions and unusual account activity.
According to the lawsuit, the scammers posed as federal agents and manipulated Rootenberg into granting them access to her computer while she was logged into her Schwab accounts. They convinced her that her identity had been stolen and directed her to move funds between her accounts, ultimately wiring money to purchase gold for the scammers.
Rootenberg’s lawsuit highlights a series of transactions that should have triggered warnings at Schwab. On February 1, 2024, she sold 54 individual stocks totaling $17,000, transferred $33,000 from her Schwab living trust brokerage account to her Schwab checking account, and moved $13,700 from her designated beneficiary account to her checking account. She also transferred $95,400 back into her living trust brokerage account. By the end of these transactions, she had just $91.16 left in her Schwab checking account, which was used to pay for her senior living expenses.
The next day, Schwab executed a wire transfer of $132,281 for Rootenberg to purchase gold on behalf of the scammers. According to the lawsuit, Schwab failed to verify the transaction with Rootenberg or her daughter, Lesley Joelson, who is listed as a trusted contact on the account.
The lawsuit points out that such erratic movement of funds is a classic sign of fraud. It emphasizes that Schwab should have recognized these red flags, especially since Rootenberg typically transacted in much smaller amounts. For instance, in December 2023, her living trust account rarely traded more than $600 at a time, and her other accounts never exceeded $10,000 in transactions.
Rootenberg’s legal team argues that Schwab violated elder abuse protection laws by failing to take appropriate action. Despite briefly locking her accounts in March 2024, Schwab later unblocked them after Rootenberg requested access. Her daughter, Joelson, urged Schwab to lock the accounts again, but the firm allegedly refused, stating they could not do so unless Rootenberg admitted she was being scammed. The scammers, however, had coached Rootenberg to remain silent about the situation.
The fraud continued into April, culminating on April 22, when Rootenberg was instructed to hand-deliver nearly $80,000 worth of gold bars to an individual outside her retirement home. Schwab only permanently locked her accounts after Rootenberg attempted to wire funds to an unknown third party in Vietnam.
A representative from Schwab expressed sympathy for Rootenberg but maintained that the company followed appropriate procedures. The statement emphasized Schwab’s commitment to balancing client autonomy, safety, and privacy, noting that the firm involved Rootenberg’s family, reported the situation to adult protective services, and alerted state securities regulators and law enforcement. Schwab, however, disagrees with the allegations and plans to defend its actions in court.
Rootenberg’s lawsuit underscores the critical role financial institutions play in protecting elderly clients from scams. It claims that Schwab missed several opportunities to intervene and prevent further losses. “This case highlights the devastating impact of scams on our nation’s elders,” the lawsuit reads. “Financial institutions, like Schwab, need to step up and protect elderly customers when, as in this case, it becomes clear they are being defrauded.”
For wealth advisors and RIAs, the case serves as a stark reminder of the importance of vigilance when managing the finances of elderly clients. The lawsuit highlights the need for heightened scrutiny, particularly when trusted clients exhibit sudden, uncharacteristic financial behavior. Advisors must be proactive in identifying and addressing potential fraud and ensure they have proper protocols in place to protect vulnerable clients.
While Schwab argues that it took appropriate steps to involve Rootenberg’s family and notify the authorities, the lawsuit suggests that more could have been done. Wealth advisors should take this as an opportunity to review their own processes for detecting and preventing elder fraud. Regularly updating fraud detection systems, enhancing communication with trusted contacts, and being aware of common scam tactics are essential steps in safeguarding clients' financial well-being.
Additionally, this case illustrates the potential legal and reputational risks for firms that fail to act on warning signs. Protecting elderly clients is not just a moral obligation—it’s a legal requirement. As elder financial abuse becomes more prevalent, advisors must be prepared to act quickly and decisively when they suspect foul play.
Rootenberg’s lawsuit could also lead to increased scrutiny from regulators, particularly regarding how financial firms handle elder abuse cases. With regulatory bodies placing a greater emphasis on protecting vulnerable clients, RIAs and wealth managers should ensure they are compliant with all applicable elder abuse prevention laws. This includes training staff to recognize the signs of fraud, implementing stronger transaction monitoring systems, and having clear protocols for reporting suspected abuse to the appropriate authorities.
In the evolving landscape of financial services, advisors must remain vigilant to protect their clients from sophisticated scams. As the Rootenberg case shows, failing to do so can have devastating consequences for both clients and firms.
