Yes, definitely seek advice of a lawyer asap, actually two or three, and make sure they give a free consultation when booking the appointments. You should also have a written list of questions ready to ask.
I agree with what Lilac said above, unless the other person can prove your dad is taking advantage of the situation to the courts then nothing can be changed unless your grandfather is of sound mind then he can change it himself.. The courts would take it over if it can be proven so not to worry your grand dad's wishes will still be met.
When it comes to family and money you will be surprised how they come out of the wood work to try and take control over it, that's where the law protects us and makes it right for our last wishes..
If the friend can prove you father has misused the POA by taking money for his own use and not spending it for your grandfather then it can be revoked and the court would take over as POA. All POA ends with the person's death and the admistrator of the estate takes over.
This is the precise reason one gives the power of attorney over to another. Contact an attorney--consultations are usually free. You grandfather was in sound mind when he made his choice, and he wanted your father to be in charge of his decisions.
The only reason I think the court would consider revoking someone's wishes of POA, is if that person had done something dubious, illegal, or had a history of really bad decisions - especially ones made after POA had been given. This sounds like someone is jealous and wants to be in charge, not a good reason for a judge to change a legal decision.
If your grandfather still has lucid moments, ask him if he wants your father (or the other person) to be in charge still, and tape it - or better yet, have another, unrelated person witness him stating it.
I am hardly an attorney - but it would seem that this circumstance - your father's father becoming less competent is the precise reason powers of attorney are given - no? I would think that if the man in question has been deemed to have Alzheimers, he would be unable to change a power of attorney without legal motions - I recommend the Nolo Press series of self-help books for research (They also have a website).
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