Quick background about my situation... I am taking care of my elderly grandfather who is in his mid 80's. He has COPD, has taken many falls and broken bones, and is starting to have very bad memory problems. He gets confused with everyday normal conversations and it is almost impossible to have a conversation with him at times. He is able to get around on his own and do some activities but I am doing all the housework, meals, etc. On to the second part of my story.... a family member who has severe mental disorders and substance abuse for 20+ years, and been to rehab a dozen times, is constantly telling my grandfather huge fabricated stories and talks badly about all other family members for the sole purpose of getting money out of him. And believe it or not it is working. He believes everything that person says even though the story changes on a weekly basis. He cannot remember previous conversations. When anyone tries to confront him about this he gets REALLY mad and now it has gotten to the point where it is spiraling out of control. I notice personality changes after their chats and a lot of hostility. It has gotten to the point where everyone in the family is afraid to get involved. Has this happened to anyone else before? If so what can be done???
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If it's really desirable for grandfather to have contact with the filching person, make sure they're never alone.
Also address the issue of whether GF has a durable power of attorney, and if so, who has control so that measures can be taken to protect GF's funds, even if they have to be put in a separate account of which GF is unaware.
If the person didn't have mental and substance abuse problems, you could confront that person with a demand for repayment. If you have knowledge of drug connections and other illegal activity, you could also alert the police anonymously. It sounds as if this person really shouldn't be involved in family dynamics, and his/her drug activity may provide a method of removal.
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No one should be confronting your grandfather, he can't retain information based on his memory loss. This problem has to be solved without your grandfather's input and someone needs to look out for him. He can't be expected to do the rational, logical thing if he has dementia.
The family member who is at the center of all of this needs to be dealt with. As your grandfather's caregiver can you limit their time together? Or how about not letting this person see your grandfather at all? Your grandfather is being financially exploited and that's against the law. Have you contacted the police?
Someone needs to step up and protect your grandfather.