Tuesday, February 28, 2012

States Continue to Use One-Time Tricks to Increase Revenue

Earlier, we looked at a Washington State proposal to increase revenue by selling unclaimed securities upon receipt (instead of waiting at least three years, as under prior law).  As we mentioned at the time, this procedure could wind up being detrimental to the owners of unclaimed property -- given the flux in the financial markets at any given time, it is quite possible that the securities will be worth more in 3 years.  Of course, the state is not following this procedure to protect holders, it is doing so to raise revenue.  On that score, it has been successful.  According to PubliCola.com, this measure has increased revenue by some $51 million.  The News Tribune posted a "Twitter Version" of the Washington State Legislature's revenue forecast meeting which notes that, during the meeting it was noted that "[m]ost of $96 m increase in [state] revenue is non-economic, due to December law regarding when unclaimed property can be sold (HB 2169)."

In the same vein, a few months ago Michigan overhauled its unclaimed property act by reducing the dormancy period for most property types from 5 years to 3 years.  According to a report concerning the legislation from the Michigan House Fiscal Agency,  the shortening of the dormancy periods was intended to increase state revenue by more than $160 million in the year of enactment.  New York used a similar gambit in an attempt to pass a balanced budget.

The problem with these methods is that they are one-time fixes that are neither "real" nor sustainable.  For example, the shortening of dormancy periods (for example, from 5 years to 3) does not really result in the state bringing in more money over the long haul -- it simply brings in 3 years' worth of property in the first year after enactment.  In years 2 and 3 after the proposal, when the state is again only bringing in a single year worth of property, collections revert to normal.  Similarly, by immediately liquidating securities and putting the resulting funds in the state treasury, Washington is not actually collecting more money, it is simply liquidating it faster -- potentially at the expense of the rightful owners who may ultimately want to collect their securities from the state.  Thus, these legislative changes are not improvements in any way, they are simply a way to delay the problem for a year or two.

States have often shortened dormancy periods in an effort to pad budgets and increase revenue.  Of course, decades ago, when dormancy periods for many items were 15 years, the unclaimed property laws only applied to a narrow set of property types, and unclaimed property audits were rare, states had a number of weapons at their disposal to use unclaimed property laws to (temporarily) increase revenue.  Today, with dormancy periods shortening to only a few years, states trying to apply unclaimed property laws to ever more contingent and ephemeral "property" types, and unclaimed property audits increasing in frequency and scope, the states' quiver of revenue tricks is emptying.

Monday, February 27, 2012

Lost & Found: A Report from Pennsylvania, A Request From Montana, & Progress in Wisconsin

Pennsylvania Treasurer Reports on Unclaimed Property Collections -- Pennsylvania State Treasurer Rob McCord has released his most recent quarterly report on the Keystone State's finances.  According to that report, Pennsylvania brought in more than $200 million in unclaimed property "revenue" to the Commonwealth in 2011.

Montana Makes Negative Report Request -- Some states have a requirement that a holder send a report every year -- even if the holder has no property to deliver to the state.  These are called "negative" or "zero" reports.  According to a press release listed on the website of the UPPO, Montana has clarified its negative report process.  More information is available on the UPPO website, but essentially Montana has clarified that a holder need not send a negative report if the holder has never before reported or remitted property to Montana.

Wisconsin Legislation Makes Progress -- The blog of the Wisconsin State Treasurer has updated the status of 3 unclaimed property related bills making their way through the Wisconsin state legislature.  The two most significant bills A418 and A419 would, respectively, require heir finders to submit a copy of any claiming agreement to the state treasury, and would increase penalties for a holder's willful failure to report or deliver property.  Both of those bills have passed the State Assembly and are awaiting action by the Senate.

NY Fraud Investigator Busted for Unclaimed Property Fraud -- According to an article in the Utica Observer-Dispatch, an investigator in New York's welfare fraud unit was prosecuted by the Manhattan District Attorney's Office (of Law & Order fame) for submitting several false unclaimed property claims.

Thursday, February 16, 2012

UPPO National Conference in Orlando, Florida

Coming up on March 11-14 is the Unclaimed Property Professionals' Organization Annual Conference in Orlando, Florida.  Join your fellow unclaimed property professionals for 3 days of unclaimed property classes, contacts and information. Regardless of your specific interests or level of expertise, there is something for everyone.  Basic, intermediate and advanced courses are being offered. There will also be a state administrator open forum, industry-specific breakout groups, and networking events.

The UPPO is probably the most well-known and active organization committed to representing the holders of unclaimed property.  Along with the annual conference, the UPPO offers other educational opportunities, webinars, networking events, contacts with state officials, and other invaluable opportunities for unclaimed property professionals.  Whether you are new to the field of unclaimed property and looking for help with the basics, or a seasoned veteran looking to expand your knowledge base and contacts, UPPO membership is highly recommended. 

Friday, February 10, 2012

Concerns Raised About Michigan Unclaimed Property Practices

Until the end of last month, Michigan was offering a voluntary compliance program for holders to come into compliance with the Michigan Unclaimed Property Act.  That amnesty program was just the latest effort by Michigan to bring more unclaimed funds into the state's custody.  Earlier last year, Michigan significantly overhauled its unclaimed property laws, changing most dormancy periods from 5 years to three years.  As we explained when the bill was proposed, the Michigan Legislature expected these changes to increase state revenue by more than $200 million over the next to years.

It seems, however, that not everyone is happy with Michigan's aggressive unclaimed property collection.  For example, the State Bar of Michigan recently sent a letter to the state Treasury Department that was critical of the terms of the state's notices to holders in connection with the amnesty program.  Similarly, the National Federation of Independent Businesses is lobbying against Michigan's practice of performing third-party unclaimed property audits of small businesses.  To that end, the NFIB is supporting legislation in the Michigan House that would create a business to business exemption.  We first mentioned that bill last summer, and it is still pending.  According to the NFIB, the bill "is being held up by Treasury officials that do not like the language."  The Treasury Department has not responded to these claims.  We will continue to follow the bill.

Tuesday, February 7, 2012

Lost & Found (f/k/a Unclaimed Property News Roundup)

Given that we're not cowboys, we've decided to rename our regular "news roundup" feature "Lost & Found" (which has more of an unclaimed property feel).  In any event, here is this week's version:

Nevada State Treasurer Marshall Elected NAST President -- According to a press release from the National Association of State Treasurers (NAST), Nevada State Treasurer Kate Marshall was elected the 2012 NAST president.  While the NAST presidency is no doubt the highest position, special recognition should also go to Utah Treasurer Richard Ellis who was elected Treasurer of the National Association of State Treasurers (kind of a Super-Treasurer).  NAST is important from an unclaimed property perspective because state unclaimed property divisions are generally housed within the State Treasurer's Office.  The National Association of Unclaimed Property Administrators is a NAST affiliate.

Celebrities - They're Just Like Us! (Unclaimed Property Version) - It's easy to assume that Hollywood celebrities and national sports stars have cadres of accounts, bankers (or even worse . . . lawyers) to manage their affairs (the financial ones, at least) and to keep track of every dollar.  Despite those efforts, however, even the rich and famous have unclaimed property.  According to Radar Online, a number of A-List celebs -- Brad, Angelina, Arnold, Kobe -- all have money waiting for them with the California State Controller's Office.  Of course, we should never be surprised by who California is holding unclaimed money for.  As we noted a few months ago, the California Controller's Office is holding money for itself.

BBC Warns About Heir Hunter Scams -- Last month, we mentioned  a BBC show called "Heir Hunters" which, according to the BBC's website "follow[s] the work of heir hunters, probate detectives looking for distant relatives of people who have died without making a will."  Now, according to IT security blog "Naked Security", the BBC is warning of a scam being conducted by persons pretending to be with the show and requesting personal financial information supposedly in connection with abandoned estates.  Though it goes without saying, we'll say it anyway:  never give your personal financial information in response to an unsolicited email, even if the source seems legitimate. 

NMI Unclaimed Property Bill Moves Forward -- Right before year end, we mentioned that the legislature of the Northern Marianas Islands approved an unclaimed property law.  According to an article in today's edition of the Saipan Tribune, the Commerce Department has recommended that the Governor sign the bill.  The bill is now awaiting the Governor's signature.

Friday, February 3, 2012

"But I'm Not Dead Yet": Congress Raises Concerns About the "Death Master File"

Every day seems to bring more news relating to the multi-state investigation into the unclaimed property practices of life insurers.  Most recently, an enterprising asset recovery firm brought a lawsuit against Prudential and MetLife claiming that those firms' unclaimed property practices have cost the State of Illinois millions of dollars.  Similarly, in the mutli-state examination, unclaimed property regulators have alleged that many insurers reviewed certain Social Security files to determine when to stop paying annuities (which are paid by an insurer until someone dies) but were not using that same information to determine when life insurance proceeds should be paid to the deceased's beneficiaries.

Central to this investigation is the so-called "Death Master File", sometimes called the Social Security Death Index (SSDI), which is a listing of all deaths reported to the U.S. Social Security Administration.  Regulators have pushed to make sure that insurers use this information to decide when life insurance benefits are payable.  New York, for example, sent a letter to all insurers in the Empire State and asked them to check the SSDI records against their outstanding policies.

But is the Death Master File a panacea?  Of course not.  So, now there is more news relating to the life insurance investigation, but today, it calls to mind a famous Monty Python skit.  According to an article at LIfeHealthPro, the Inspector General of the Social Security Administration testified before Congress that there are more than 1,000 instances per month where deaths are reported to the SSA, but the person in question . . . isn't actually dead.  That, as you can imagine, may cause problems such as identity theft or adversely affecting the undead's credit reports

What this underscores is that property owners still play a crucial role in making sure that their property does not go unclaimed.  While reliance on government databases, public filings and other "official" records can be helpful in finding missing owners, or locating new addresses, such records are never infallible.