prove, for the most part, worthless. These rackets frequently victimize older people who hope to put their resources to profitable use. In Fiscal Year 1974, investigations were completed in 155 cases, resulting in the discontinuance of 88 questionable operations. A public loss of $32,552,735 was cushioned somewhat by the fact that 18 convictions were obtained and an estimated public savings of $3,412,531 was effected.

Vending machine routes, advertised to require only part-time attention, are particularly attractive to older retired persons. Recently, an operator of this type promotion in the Mid-West induced 34 persons to invest $127,000 in area distributorships. The defendants converted the money to their personal use and the investors received no vending machines at all.

CHAIN REFERRAL SCHEMES

These schemes are aimed directly at low-income consumers and the elderly are particularly susceptible. Fast talking salesmen pass off desirable, but grossly overpriced, appliances and home improvement items under the misrepresentation that the products will actually cost nothing. The victim is requested to supply names of friends and associates as potential purchasers and thereby earn commissions. Not until they have signed conditional sales contracts and other documents, do the victims realize they have actually obligated themselves to pay for a product which they often neither want nor can afford.

During Fiscal Year 1974, 131 investigations caused the termination of 98 chain referral schemes. Public loss in these cases amounted to $4,999,402. Public savings as a result of the discontinuances are estimated at $306,635.

HOME IMPROVEMENT

This type of fraud is generally directed at the uninformed owners of modestly priced homes. Elderly citizens are often physically unable to make repairs themselves, and can be convinced that their property is badly in need of expensive renovation. Likewise, such items as aluminum siding, porches, patios and garages, etc., are attractive to retired or semi-retired individuals who desire to make their homes as comfortable as possible.

Of late, a group of versatile fraudulent operators offered home improvements of all types. Convicted of mail fraud, they received substantial prison sentences. The scheme, which was in operation for about a year, involved contracts obtained through fraudulent representations, the use of fictitious names and even disguises. Public loss of approximately $220,000 was incurred by home owners and loan companies.

LAND SALE SWINDLES

The purchase of land for a retirement homesite is an attractive investment for senior citizens. Unfortunately, some promoters misrepresent the property they have for sale. Unfinished developments, swamp lands and barren desert plots, may be foisted on an unsuspecting purchaser.

One noteworthy case involved a remote desert area of Mohave County, Arizona, which was sold off in lots under the name "Lake Havasu Estates" (no connection with Lake Havasu City). Through false claims, that an interstate highway from Phoenix to Los Angeles was under construction on the land; that the Ford Motor Company and singer Eddie Fisher had purchased large tracts for industrial development; that the owners owned the relocated London Bridge; and that purchasers who were not satisfied after veiwing their lots would receive full refunds, victims were enticed to pay from $3,000 to $5,000 per lot. Over $6 million was lost. Eight officers of the company were convicted of mail fraud and sentenced to serve a total of three years, seven months, in prison, plus eight years on probation. A $10,000 fine was also assessed. The president of the company received the heaviest prison sentence-two years. Investigations by the Postal Inspection Service concluded in 17 land sale promotions of this type being discontinued during FY 1974, and conviction of 11 operators. An estimated public savings of $13,542,800 was achieved.

MATRIMONIAL SCHEMES

Lonely people, including the elderly, are often swindled by dishonest persons. Men and women seeking pen pals, with a view toward finding suitable mates,

frequently join lonely hearts clubs. Few, if any, of these clubs have facilities for investigating the people who apply for membership and it is said that a list of members can be purchased with little or no difficulty. Club membership lists are, therefore, sometimes obtained by unscrupulous persons who use them to carry on extensive correspondence with prospective victims. The correspondence is usually started by the promoter's misrepresenting himself to be exactly what the club member desires in a mate. As the correspondence continues, endearing terms are used, and when the prospective victim mentions matrimony, his or her pen pal responds with talk of current financial problems. There will generally follow a request for money to carry the loved one over the temporary crisis. Once the money is received, the promoter ignores additional correspondence, or returns the letters marked "moved, left no address." Obviously, many victims are hesitant to report the matter because of embarrassment.

MEDICAL FRAUDS

By nature, medical frauds probably affect the elderly more than any other portion of our population. Today, despite up-to-date medical facilities and warnings published in every media in almost every community, elderly people fall prey to medical quacks. These charlatans depict, by means of cleverly designed advertisements, cures for a long list of geriatric problems, including arthritis, cancer, obesity, impotency, and headaches. Rapidly rising medical costs and lack of sufficient insurance coverage, among other circumstances, influence the elderly to try these quick cures. On the surface, these remedies appear to be much lower in cost, and require little more than the placing of an order. The huckster's spiel, that his nostrums reduce cost of medical care, is difficult to believe, in view of the fact that in this field the known public loss for Fiscal Year 1974 was over $9,000,000.

In addition to prosecution, many medically related schemes are thwarted by timely action by the U.S. Postal Service. This action, under 39 U.S. Code 3005, may result in orders being returned to the senders, effectively stopping the promotion. Such was the case recently with a company claiming a cure for arthritis, wherein the product furnished was a dietary regimen. In establishing the fraudulent nature of the representations made, the Inspection Service obtained expert medical testimony to the effect that no one treatment is available for all forms of arthritis and the treatment furnished would do no good whatsoever.

Some medical fraud schemes include representations that are not only false and misleading, but may also be considered dangerous. One company, in particular, claimed to have developed a plan that would cure the flu overnight; was a means of preventing oral cancer; would assist in extending the average age to 100; would prevent maiming diseases, and still cost less than $25. Much of the information contained in the plan could cause additional problems, rather than relief.

Also, reliance on the use of the mail order cure would certainly delay the victim's seeking competent medical advice. Prompt Inspection Service action put this company out of business. Investigations brought about the discontinuance of 133 questionable promotions in the medical fraud category in Fiscal Year 1974.

SOLICITATION OF FUNDS

Thousands of organizations solicit funds from the public, and appeals for contributions extend to many causes and include an endless variety of charities and betterment organizations. Elderly people who have experienced life's problems are often anxious to assist those less fortunate than themselves. In some instances, this involves reducing an already meager income by that much more. Unfortunately, funds solicited by unprincipled promoters funnel into the hands of swindlers. Schemes of this type vary, but all have one thing in comon-they prey on the sympathy and the desire of many to help the unfortunate. Unauthor ized assumption of the names of legitimate charitable organizations, as well as the use of bogus and official sounding titles, are some of the ploys used by the con man. A fraud operator needs little more than a solicitation letter and a mailing address to set up his business.

There were 147 cases issued for investigation by the Postal Inspection Service in the area of solicitations, in general, during Fiscal Year 1974, and of this number 64 promotions were discontinued.

WORK-AT-HOME SCHEMES

Retirees, invalids, housewives, and others, particularly in the poor and lower middle-class income levels, frequently desire to supplement whatever income they have. Age, health and family responsibilities may make it impossibe for these persons to hold even a part-time job. Naturally, the prospect of employment at home is attractive to them.

A mail-order promoter in Philadelphia, Pennsylvania, was recently convicted of operating a work-at-home scheme in which the public loss was approximately $70,000. The business consisted of soliciting money through the mails in return for a "work-at-home" kit which contained letters of solicitation to be sent to new victims. The letters acted as a self-perpetuating mechanism, since the victim was advised to duplicate the operation on his own.

Investigations of 132 such promotions resulted in 100 work-at-home schemes being discontinued during Fiscal Year 1974. The public savings resulting from these investigations is estimated at $150,787.

PUBLIC EDUCATION AND FRAUD PREVENTION PROGRAMS

The Postal Service is vitally interested in the protection of the public which can be enhanced by increased consumer awareness. The Mail Fraud pamphlet attached is available on request, as is a similar publication in Spanish.

The Postal Inspection Service also maintains close liaison with other federal, state and local agencies having a concern for consumer protection. In addition, Postal Inspectors made over 1,000 speaking appearances before various law enforcement, civic, education, and consumer groups this past year. Although, in most cases, our investigations are "after the fact situations," our programs are also directed at prevention, and we are continually seeking new ways of developing greater public awareness of fraud danger signals.

I hope this summary will be helpful to you and your committee. If we can be of further assistance, please do not hesitate to contact me. Sincerely,

NORMAN S. HALLIDAY, Assistant Postmaster General, Government Relations Department.

ITEM 24. RAILROAD RETIREMENT BOARD

JANUARY 28, 1975.

DEAR MR. CHAIRMAN: With reference to your letter of December 20, I am pleased to enclose a statement summarizing major activities of the United States Railroad Retirement Board on aging during 1974. It is anticipated that payments under the Railroad Retirement and Unemployment Insurance Acts will be somewhat higher during 1975 than in 1974.

We look forward to your committee's 1974 report on developments in aging. Sincerely yours,

[Enclosure]

R. F. BUTLER, Secretary.

U.S. RAILROAD RETIREMENT BOARD

The U.S. Railroad Retirement Board is the Federal agency that administers a social insurance system, separate from but coordinated in several ways with Social Security, for railroad workers and their families. Programs of the system include the following: (1) old age, survivor and disability benefits under the Railroad Retirement Act and (2) unemployment and sickness insurance benefits under the Railroad Unemployment Insurance Act. In addition, certain administrative services under the Federal health insurance (Medicare) program are performed with respect to aged and disabled railroad workers.

DEVELOPMENTS IN 1974

LEGISLATION

The Railroad Retirement Act of 1974, enacted October 17, 1974 as Public Law 93-445 and effective January 1, 1975, completely restructures railroad retirement benefits. The legislation was developed by a joint committee of railroad manage

ment and labor representatives, and was intended to put the railroad retirement system on a relatively sound financial basis, make certain improvement and preserve the existing equities of career railroad employees. The actuarial deficit was reduced from more than nine percent of taxable payroll to less than one percent on a level basis. Major provisions of the Act include:

(1) A revised regular employee annuity formula, consisting primarily of two tiers. One tier is computed in the same way as a social security benefit, using the employee's combined railroad and social security earnings. Any social security benefit the retired employee is paid will be subtracted from the tier 1 amount. The second tier is a staff type benefit based solely on railroad service and compensation.

(2) Supplemental annuities payable to employees who with 30 or more years of railroad service retire after June 1974 at age 60 and older. For those who retired before July 1974, or who have 25-29 years of service they remain payable at ages 65 and older. The supplemental annuities will be for smaller amounts, ranging from $23 based on 25 years of service to $43 for 30 or more years, but there will no longer be an offset made for them in the regular annuity computation. Thus the total benefits will be substantially the same or higher.

(3) A full spouse annuity is payable at age 60 to the wife of a retired employee age 60 or older with 30 or more years of service if the employee's regular annuity began after June 30, 1974. For an employee age 62-64, with less than 30 years of service, whose regular annuity begins after December 31, 1974, the new law lowers the age required of such an employee for his wife to be eligible for a spouse annuity. In 1975 or later, the employee need only be age 62 for his wife to receive a reduced annuity at age 62 or a full annuity at age 65. The wife's tier 1 amount will equal one-half of the employee's tier 1 before reduction for his social security benefits. Her tier 2 amount equals one-half the employee's, subject to the limitation that tier 1 and tier 2 cannot total more than 110 percent of the largest amount that social security could pay as a spouse benefit. Social security benefits received by the wife are subtracted from her tier 1 amount.

(4) A "grandfather" clause, which guarantees that employees and their wives retiring during the eight years following 1974, will receive no less than the amount that would have been payable under the previous railroad retirement provisions, excluding social security benefits.

(5) An increase in most survivor benefits, which is also calculated using a two tier formula, effective January 1, 1975. The calculation basis for survivor annuities is 130 percent of the amount social security would have paid if the beneficiary had been covered by that system. Previously, they had been guaranteed 110 percent of the social security amount and the majority of survivor beneficiaries were paid under this guaranty.

(6) "Windfall" dual benefit to employees, spouses and survivors who meet certain criteria deemed necessary for "dually vested" status under both the railroad retirement and social security systems. The benefit replaces, at least in part, the offset in tier 1 amounts for the receipt of social security benefits. This is a temporary feature of the system meant to give allowance for social security service prior to 1975. The cost for this provision will be met by the general funds of the Government.

(7) Cost-of-living increases for both tier 1 and tier 2 benefits. Tier 1 benefits will be increased in the same way and at the same time social security benefits are increased and survivor tier 2 benefits will be increased proportionately. Four cost-of-living increases in tier 2 retirement benefits are provided during the next six years.

(8) A tax refund, for employees who are not entitled to windfall dual benefits, for any excess social security taxes they paid on his combined earnings under both systems for years after 1950 and before 1975. The refund will be paid to the employee upon his retirement or to survivors if he dies without having retired. For years after 1974, any railroad employee paying excess retirement taxes may apply for a refund on his income tax return.

(9) Gross residual lump-sum death benefits are frozen to the amount accrued through 1974 and insurance lump-sum for employees with 10 or more years of service before 1975 will be based on that pre-1975 service. For others, the insurance lump-sum will be equal to the amount payable under social security, presently $255.

(10) In effect the temporary increases in railroad annuities of 15 percent, 10 percent and 20 percent enacted by Congress in 1970, 1971 and 1972, respectively, are made permanent.

BENEFICIARIES AND BENEFITS

During fiscal year 1974, benefit payments under the railroad retirement and railroad unemployment insurance programs totaled $2,721 million, an increase of $191 million from fiscal 1973. In addition, payments of $275 million for hospital insurance benefits and $86 million in supplemental medical insurance benefits were made on behalf of railroad workers covered under the Medicare program. Retirement and survivor benefits amounted to $2,671 million, almost nine percent higher than the total in fiscal 1973. However, unemployment and sickness payments in the year totaled $50 million, almost one-third less than in the previous year.

In the course of the year, 1,073,000 individuals received benefits under the retirement-survivor benefit programs. The vast majority (over 80%) were aged 65 and over. Almost 446,000 retired employees were being paid a regular annuity of $297, almost $28 higher than a year earlier. In addition, 116,000 of these employees (30% of all retired employees age 65 and over) were being paid supplemental annuities averaging $66. Some 210,000 wives, received an average annuity of $142. Of the 333,000 survivors on the rolls as of June 30, 1974, over 286,000 were aged widows receiving an average annuity of $183. About 860,000 persons who were receiving or were eligible to receive monthly benefits under the Railroad Retirement Act were covered by hospital insurance under the Medicare program at the end of fiscal year 1974. Of these, 837,000 (97%) were also enrolled for supplemental medical insurance.

Benefits under the Railroad Unemployment Insurance Act were paid to 113,000 railroad employees. However, less than $1 million (1.6%) of the benefits went to individuals aged 65 and older.

ITEM 25. SMALL BUSINESS ADMINISTRATION

JANUARY 13, 1975.

DEAR MR. CHAIRMAN: This will acknowledge your request with reference to the Annual Report of the Senate Special Committee on Aging.

The services of this Agency are available to small businessmen regardless of age. However, we do not categorize borrowers by age and cannot report numbers of loans approved by age of clients.

Our disaster loan program is particularly helpful to older citizens who are injured by natural phenomena. It is Agency policy that age not be a factor in any disaster loan application decision. If an elderly person's home is destroyed in a disaster, all other things being equal, he receives a disaster loan as rapidly as a younger person.

For our other lending programs, age, in itself, is not a prohibiting factor in receiving loan approval. By legislative mandate, we must have reasonable assurance that the loan can be repaid before we approve any loan and, in some instances, the age of the owner(s) of the business may play a role in determining repayment ability. However, we have and will continue to administer all of our loan programs without regard to age, creed, color, sex, or national origin.

We coordinate the efforts of many senior citizens through the SCORE (Service Corps of Retired Executives) Program. SCORE is an organization of retired business executives who volunteer their services to help small business owners solve their problems. The collective experience of SCORE volunteers spans the full range of American enterprise. We have 5,200 volunteers at the present time during FY 1974 these volunteers did approximately 60% of the total counseling to small business, and we expect it will increase to 70% during FY 1975. We value this contribution to small businesses by our older citizens. With all good wishes. Sincerely,

THOMAS S. KLEPPE,

Administrator.

ITEM 26. VETERANS ADMINISTRATION

FEBRUARY 10, 1975.

DEAR MR. CHAIRMAN: In response to your request of December 20, 1974, I am pleased to forward the enclosed report on Veterans Administration activities relating to developments in aging for the year 1974.

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