Thank you everyone for the feedback, thoughts, and pieces of advice. I've been reading through the responses trying to take them in and deal with the holidays as well, which is why it took a while to respond.
I appreciate the general sentiment of sympathy to my mother and sister. I want to fill in a little more details on the situation and respond to a few quotes. I cut and pasted them onto a document so I won't be able to credit each person directly.
There have been a lot of questions posed about "where did the money go?" This is my sister's question and to some extent my question, too. My sister sent me her tax returns for the past 5 years that included her jointly filed returns in addition to her business returns. I don't really understand where to look on the tax returns to figure out exactly how much income they took home, after business expenses, etc. However, from what I gathered, combined they made between 200K to 600K per year, depending on how her business did. They have always appeared to live a relatively lavish lifestyle taking multiple vacations a year (between 5-15), often taking their 4 children with them. They have an au pair, drive nice cars (that they own outright), wear nice clothes, buy the nicest electronics, clothes and things for their kids and themselves. Their oldest son goes to a private high school for the past 2 years costing at least 40K a year, I think. Everyone for years has always said, "I don't know how they afford to do the things they do."
When my sister asked him where the money went, he claimed that the expenses just got out of hand, starting a few years ago when they had some expenses - a bar mitzvah in St Thomas and another one back home, which was incredible (both of these bar mitzvahs were for the same kid). He also said that the private school tuition has set them back as well. My sister's business took a loss this year, and he said that he just kept getting behind. My sister had no knowledge of this, despite her asking for years about the finances. My BIL is a very arrogant, controlling person, who hid this from my sister. She definitely takes some of the blame for her ignorance of the situation, but she was trying to get the information for years, but didn't press very hard because things had been ok for 18 years of marriage, and she was married to a financial investor who handled finances for a living. He was successful at his company, getting bonuses and rewards for his performance and continued to get promoted. Things were fine until they weren't.
It doesn't seem out of the realm of possibilities that his explanation of "daily life expenses getting out of control" would explain where some of it went, but it seems unlikely that it would explain everything, and definitely not my mom's credit card debt.
I have contacted a lawyer. Someone I've used in the past and has been helpful so far. Some of the issues with my mother's POA is that she is completely mentally incompetent now, but was competent at the time of issuing the financial POA to my BIL and the medical to me. So that complicates things and likely I will need to go to probate court to make the necessary changes.
Regarding the comments on putting a credit freeze on my mom, and reporting this as fraud. As her POA, I think he was able to open up credit cards in her name, so I don't know if reporting him is really legit. He clearly acted unethically, and maybe we will find that it is illegal at some point, but right now I don't know if that's the best thing to do. I'm not even sure I can freeze her credit now. I have to wait until I meet with my lawyer again.
When this first happened, my other sister and I spoke with my BIL on the phone twice to get his side of the story. He downplayed the financial issues, and said he has made some mistakes and he takes responsibility for it, but what my sister did was worse and he's worried about her. With all divorce, there's always 2 sides to the situation and I'm sure I'm not hearing all of either side. But the bills keep coming in that appear to be unpaid, including a bill to a lawyer that appeared to put my mother's assets into a trust so she would qualify for medicaid to pay for her aid. However, this lawyer's bill said that it was unpaid and carried a balance with interest on it. My BIL said that the bill is being paid monthly and they take off the interest fee when it gets paid. Does that really happen?
I was planning to meet with my BIL to "hand off the POA" to me, or at least get all the financial information handed over to me. But he's been avoiding me, dodging my calls, and I'm convinced that he's not going to talk with me anymore.
The biggest problems we have is that we still do not have all the information on all the financials. My sister keeps discovering unpaid bills and just found out she has as second lien on her house. Without being able to speak with him and get all the information, we can't get a lot of answers to these very good, valid questions that everyone is bringing up. For example, I don't know my mom's bank account information, rent, utilities, medicaid info, health insurance info, information for her in-home aid, and many other things I can't even think of.
I found out this information about my mom by running a credit check on her. My sister got a credit card bill mailed to her house in my mother's name that had no charges on it, but carried a $15K balance on it. So I ran a credit check on her and found that there were 2 open credit cards - one which has had zero payments for over a year and debt of $45K. There's no rational reason for her debt. He insists that her money is in tact, by the way, based on the last conversation I had with him. I'm hoping that it still is and he just used these credit cards to transfer his own debt.
The big problem is that this is much more complicated than just my BIL is an ass and needs to go to lose his job and go to jail. I don't disagree with that statement, but I don't think he did this with any malice and I believe he is a good person. My sister believes he is too. He's a great father and has always been wonderful to my mother. This story is much more complicated than I can possibly go into in this forum. However, I'm trying to stay as pragmatic and unemotional about this to maximize the greatest benefit for the parties involved - mainly my sister's 4 children who are completely innocent and have the most to lose from this situation. No matter what happens, their financial quality of life will go down as it does in most divorces. My mother also is very innocent, but she's old, disabled, and blissfully unaware of what is going on. I will make sure that nothing bad happens to her and she will be able to rebound.
I'll try to write back more frequently to answer the questions directly. I'll also keep you informed as things unfold. The advice and questions are greatly appreciated and you've brought up some really interesting points that I will keep in mind and bring to the lawyer. I'm so annoyed about this whole situation and how expensive and ugly it's going to get.
Thank you all for the words, and please keep them coming. It's quite helpful.
Happy new year!