Monday, December 15, 2014

Another Audit-Related Delaware Lawsuit

Earlier this summer Temple-Inland commenced a lawsuit against the State of Delaware, challenging the findings of a Kelmar-initiated unclaimed property audit, especially as to how estimated liabilities are calculated.  In particular, Temple-Inland alleges that Delaware made an audit demand in excess of $1 million for estimated historical unclaimed property liabilities after having identified only about $150 in actual liability.  Delaware promptly moved to dismiss that litigation, and that motion is still pending in a Delaware federal court.

Now, it looks like Delaware has another lawsuit on its hands.  Late last week, Osram Sylvania, filed suit against Delaware in the same federal court arising out of another Kelmar audit.  This time, according to the allegations of the complaint, Delaware seeks in excess of $2.2 million on an actual liability of less than $22,000.  As in the Temple-Inland case, Osram alleges that Delaware's audit and liability estimation methods violate holders' due process rights and the Supreme Court's holding in Texas v. New Jersey as to both the mechanics and the retroactive nature of that process.

One notable item in the filing is an allegation as to the fees Kelmar earns from auditing holders.  According to the complaint, Delaware earned in excess of $53 million from Delaware from unclaimed property.  Since most audits are conducted on a "contingent fee" basis - that is, the auditor's fee is a portion of property collected.  That's a lot of (presumably, other peoples') money.

Friday, December 12, 2014

Friday Lost + Found: Inside the Vaults in the Land of Enchantment, Another DMF Settlement

Video on New Mexico's Unclaimed Property -- 'Tis the season for unclaimed safe deposit boxes.  Albuquerque's KOAT (ABC) has a short video about the $132 million in cash and property that New Mexico's unclaimed property regulators have collected from abandoned safe deposit boxes.  The New Mexico Department of Revenue and Taxation suggests that now is the time to determine if some of that property is yours.

Another Life Insurer Settles Unpaid Benefits Claims -- InsuranceNewsNet has the story of another life insurance death master file settlement.  See here for a primer.  The article states that regulators are "turning away from investigations and settlements, and instead focusing on writing legislation that clearly establishes their authority to conduct the settlement."  Perhaps 2015 will bring such legislation.

Wednesday, December 3, 2014

South Dakota Finds Out That Unclaimed Property Changes Bring Only Temporary Revenue Relief

At the beginning of this year, South Dakota's legislature and Governor were trying to figure out how to spend an "extra" $33 million in unclaimed property revenue, collected as a result of shortening dormancy periods, additional holders moving into the state, and reduced outreach efforts.  As we've warned repeatedly, however, such measures are only a temporary fix for state budgets -- shortening a dormancy period from 5 years to 3 years, for example, means that three years' worth of property gets collected in the first year after the legislation passes.  After that bump in year one, unclaimed property collections return back to normal.

According to a story in the Argus Leader, South Dakota is finding that out this year.  After record collections last year, unclaimed property revenues are down significantly this year and 80% under the amounts projected by the state.  While South Dakota has apparently been able to adjust other revenues and spending to account for the shortfall, this serves as a reminder to other states that unclaimed property revenue -- especially when that revenue is artificially increased by legislative activity -- can't be relied upon to take the place of prudent planning.

Monday, December 1, 2014

Life Insurers Under Le Microscope

We recently mentioned yet another settlement between a life insurance company and the states concerning efforts to search for beneficiaries of unclaimed life insurance policies.  U.S. insurance regulators are not alone in focusing on this area.  Recent news suggests that regulators across the Atlantic are likewise taking steps to insure that those beneficiary searches are conducted.

As a result of legislation passed in 2007 (Law 2007-1775) French life insurers have an obligation to search for the beneficiaries of unclaimed life insurance policies.  According to a Reuters article, French life insurance company CNP Assurances was fined $50 million by the French Prudential Supervisory Authority for failing to take necessary steps to locate beneficiaries.  The regulator estimates that there are unclaimed life insurance policies in France worth in excess of 2.7B euros.

Monday, November 24, 2014

Meet Your New Escheators (Or, In Some Cases, Welcome Back)

Most state unclaimed property divisions are part of the Department of the State Treasurer or Department of Revenue (the latter, some would argue, is quite telling).  In any event, that means that the head of the state’s unclaimed property program in many states is an elected official.  There most recent election cycle featured a number of State Treasurer, State Auditor, or Attorney General races, and starting in 2015 we will have some new (or re-elected) officials dealing with unclaimed property issues.  Meet your escheators (elected State Treasurer unless otherwise noted):

 Alabama -- Young Boozer
Arizona -- Jeff DeWit
Arkansas -- Andrea Lea (State Auditor)
California -- Betty Yee (State Controller)
Colorado -- Walker Stapleton
Connecticut -- Denise Nappier
Florida -- Jeff Atwater (State CFO)
Idaho -- Ron Crane
Illinois -- Mike Frerichs
Iowa -- Michael Fitzgerald
Kansas -- Ron Estes
Massachusetts --Deb Goldberg
Nebraska -- Don Stenberg
Nevada -- Dan Schwartz
Rhode Island -- Seth Magaziner
South Carolina -- Curtis Loftis
South Dakota -- Rich Sattgast
Vermont -- Beth Pearce
Wisconsin -- Matt Adamczyk
Wyoming -- Mark Gordon

Friday, November 21, 2014

Lost & Found: Another Insurer Settles, Illinois Auction, UP in the Mainstream

A brief roundup of some recent unclaimed property related news:

More Insurance Industry Settlements -- According to an article on Insurance News, another life insurer -- Sun Life of Canada -- has settled claims relating to the alleged "asymmetrical" use of the Social Security "Death Master File."  Generally, the states allege that insurers actively researched death index information for annuity products (i.e., where the insurer was paying benefits until the policyholder died) but didn't use the same information to determine when death benefits became payable to beneficiaries.  According to the article, this represents the 18th settlement arising the from the multi-state investigation of life insurers' unclaimed property practices.

Illinois Unclaimed Property Auction -- Looking to do some early holiday shopping?  The Office of the Illinois State Treasurer will be commencing an auction of unclaimed property on Monday.  The Northwest Herald has the details.

Unclaimed Property in the New York Times -- For those of us in unclaimed property -- a relatively niche practice, to say the least -- it's always a little exciting when UP news makes it to mass media.  (If for no other reason than to prove to our disbelieving family members that such laws exist).  The The New York Times recently had a "Your Money" article by Ron Lieber featuring unclaimed property.  

Wednesday, November 19, 2014

5Ws: The Proposed Revision to the Uniform Unclaimed Property Act -- A Primer for the Well-Adjusted

Earlier this year, to some fanfare in the unclaimed property industry, the Uniform Law Commission ("ULC") embarked on a quest to revise the Uniform Unclaimed Property Act.  As a glance at the ULC page on the revision makes clear, comments on this endeavor have been made by advocacy groups, holders, industry associations, audit firms, regulators, and locator firms.  There have also been reams of paper spilled on speculation as to what the ULC may or may not do, opinion on what the ULC should or should not do, and commentary on what the ULC's revisions should or should not be.
We may comment on specific proposals relating to the ULC in due course.  That said, it has come to our attention that (sadly) many people do not follow uniform act revision processes closely as a general matter.  They do not understand the rhythm of the law-drafting process, the delicate beauty of the waltz between legislator and lobbyist, the sweeping grace of the intellectual seed of policy being planted in the fertile soil of the . . . .

Where were we?  For those of you generally aware of all the activity surrounding the uniform unclaimed property act revision, but nevertheless leading well-adjusted lives and with basic questions regarding the process (Where is the State of Uniform, anyway?  Probably near Idaho.) we present the following primer in the form of the "5Ws."

Who?  The Uniform Law Commission, also known as the National Conference of Commissioners on Uniform State Laws.

Umm....great.  But who are those people?  The Uniform Law Commission is a group of lawyers, appointed by state governments, "to research, draft and promote enactment of uniform state laws in areas of state law where uniformity is desirable and practical."  Note that the Uniform Law Commission is in no way specific to unclaimed property.  According to the ULC's website, the organization has promulgated over 300 uniform acts since its founding in 1892.  These folks have brought you such famous hits as the Uniform Commercial Code ("UCC"), the Uniform LLC Act, and the Uniform Probate Code.  Inasmuch as the Unclaimed Property Act deals with the disposition of property arising out of often multistate transactions, and given that a specific item can generally only be escheated to one place (despite efforts to the contrary by unclaimed property auditors) unclaimed property law is clearly one of those topics where "uniformity is desirable and practical."

What?  Revising the Uniform Unclaimed Property Act of 1995.  (Seriously, if you got this far in the post and didn't know that yet . . . .)   

Where?  In most places.  Or nowhere.  Depends on how you look at it.  As noted above, there is no State of Uniform.  So, who cares what the laws are in that (fictional) jurisdiction?  A lot of people, it turns out.  While the legislation drafted by the ULC is not, itself, "law" anywhere, and is not enforceable by any court or regulator -- ULC-drafted legislation is often used as a model by states in drafting their own laws.  For example, while the Uniform Unclaimed Property Act of 1995 (the most recent unclaimed property legislation finalized by the ULC) is not itself enforceable, a version of that Uniform Act is in place in dozens of states.  The takeaways here are (1) the uniform acts are used by states as models for their own legislation, but (2) the uniform act itself is not enforceable anywhere.

When?  Hard to say, but it will take a while.  The ULC has not drafted proposed language for a new uniform act, but has solicited comments from interested parties.  The next meeting of the ULC is scheduled for February.  Some time after that, proposed legislation will be drafted, commented upon, and potentially amended.  Once that happens, the uniform law may be finalized.  As noted above, however, even the promulgation of a new uniform act by the ULC does not make that act enforceable.  The promulgation of a uniform act is thus not the end.  Instead, to paraphrase Churchill, it is just "the end of the beginning."  The model legislation still must be introduced, sent to committee, debated, voted upon and signed by the governor just like any other legislation.

Why?  Quite simply, the world has changed quite a bit since the last model act was issued (you know, in the last millennium).  In 1995:
  • The is what the internet looked like;
  • The countries of Montenegro, Kosovo, East Timor, and South Sudan did not exist;
  •  The New York Times never had a color photograph on the first page;
  • Google did not exist;
More saliently, 1995 was before the ubiquity of the gift card, before electronic payments, before on-line logins to financial accounts, etc.  The potential revisions to the act will no doubt address many of these developments.  They might also have a thing or two to say about the conduct of unclaimed property audits, the availability of interest paid on unclaimed property held by the state, and number of topics that have arisen in the last 20+ years.

Thursday, October 30, 2014

'Twas the Night Before Fall Reporting

‘Twas the night before Fall Reporting, and all through the firm,
Everyone in unclaimed property was starting to squirm.
Wire transfer instructions were given to disbursements with care,
In the hope that remittance confirmations soon would be there.
In state capitals, Treasurers smiled at the incoming proffers,
Knowing that millions would soon be in the states’ coffers.
Bob was in payables, and me with the CFO,
Was it all out?  Both of us wanted to know.
When down from the Controller there arose such a wailing,
I assumed there must be a late response to a due diligence mailing.
Away to accounting we ran down the hall,
Where Bob and I nearly tripped over the accumulated sprawl.
UP-1s, NAUPA codes, and Holder Reporting Guides,
Covered every flat surface with big stacks besides.
When, what led my stomach to churn and contort,
But hundreds of names that were left off the report.
When I asked how this many names could’ve been missed,
I was told they were still working off last quarter’s list.
Quickly, Bob and I each stifled a cry,
Certainly an exemption or two must here apply.
Airline miles? Lottery winnings? Stale B2B credits?
Perhaps just small balances with offsetting debits?
Alas, no, we would be late, and it might be gory,
With penalties and interest (both statutory).
There just wasn’t enough time to report all the names
Relationship codes, amounts less “lawful claims.”
We needed an answer, and the clock was still ticking,
Through each statute and reg, we just kept on clicking.
Then I noticed on the ledger I continued to assess,
All of the amounts listed were $50 or less.
My mood picked right up, and I started to sing:
We’ll just add it all up and report the whole thing!
Aggregate reporting -- that was the way!
We’d still get this report out by the end of the day!
We quickly revised, and added, and listed,
Everyone in tax helped, even legal assisted.
When it was ready, we unleashed the whole thing,
Breathing a sigh of relief (at least 'til next spring).
And I said to Bob, as the remittance flew out of sight,
Happy fall reporting to all, and to all a good night!

Monday, October 6, 2014

Say "Aloha" to Your Unclaimed Property

Modern day unclaimed property laws are "custodial" in nature, meaning that the state takes possession of, but not legal title to, property that is reported and remitted to the state.  As a consequence, it is the rule in most states that although unclaimed money and assets may be remitted to the state's general fund and used for state spending, the owner never loses the right to reclaim his or her property.  This is in contrast the the historical practice of bona vacantia in England and prior Roman civil law, where "ownerless goods" would be owned by the crown.

In fact, it is the custodial nature of these laws and the unlimited opportunity for the owner to reclaim his or her money that serve as the states' most prominent response to frequent holder complaints that state unclaimed property laws are increasingly unfair, complex or burdensome.  Some states, however, are quietly limiting owners' rights to make claims for property held by the state. 

For example, pursuant to Hawaii Senate Bill 2321, effective July 1 of this year, an owner has 10 years to file a claim for property valued at $100 or less.  After that time, according to the new law, the property "shall escheat to the state" permanently.  According to testimony by the Director of the Department of Budget and Finance (who, to his credit, testified against this legislation) the new law means that there are 275,000 items (in an aggregate value in excess of $20 million) that are now subject to escheating permanently to the state.

Similarly, in Idaho, the amendment to Section 14-518 of the Act means that items valued at less than $100 need not be listed on the state's website database of unclaimed property held by the state.  While this represents a small fraction of unclaimed property held by the states as a whole, as states become more addicted to unclaimed property as a revenue raising measure, such initiatives will probably increase (to the detriment of owners).

Monday, September 22, 2014

California Amends Definition of “Owner” to Give Charities Greater Access to Unclaimed Funds

On September 15, California Assembly Bill 1712 became law.

This legislation expands the definition of an "owner" under the Act authorized to make a claim for unclaimed property in the Controller's possession.  In particular, the definition of "owner" was amended to add "a nonprofit civic, charitable, or educational organization that granted a charter, sponsorship, or approval for the existence of the organization that had the legal right to the property prior to its escheat but that has dissolved or is no longer in existence, if the charter, sponsorship, approval, organization bylaws, or other governing documents provide that unclaimed or surplus property shall be conveyed to the granting organization upon dissolution or cessation to exist as a distinct legal entity." 

In other words, if the California Controller's office is holding unclaimed property for the American [Charity] Association - LA Chapter, and that entity is dissolved or no longer exists, the property can be claimed by the nationwide American [Charity] Association.
According to a report on the bill by the Assembly Judiciary Committee, the bill arose from the acknowledgment that "there is a large amount of unclaimed property  . . . that is owned by nonprofit chapters or affiliates that have dissolved."  By amending the definition of owner to include the parent or sponsoring entity of the dissolved organization, the bill's sponsors intend to "retrun [the funds] to the charitable sector where it can once again benefit the community."

While the legislation is certainly laudable, insofar as it requires that the organizational documents of the dissolved entity to provide that unclaimed property will pass to the parent entity, it is unclear what impact it will have on the millions of dollars already in the Controller's possession.

Wednesday, September 3, 2014

Welcome to Fall (Reporting Season)

Labor Day has just passed, the kids are back at school (or will be, shortly) and the (unofficial) end of Summer has passed.  Next up for unclaimed property professionals is the Fall reporting season.  As of today, we are 60 days out from the November 1 reporting deadline in a few dozen states.  Due diligence letters have (hopefully) been sent out, and the process of preparing the Fall reports will now begin in earnest.  As we being the annual crunch to get the reports out the door on schedule, consider if there is anything you can do today to prevent the last minute rush, or to adopt new lessons learned.

Need to learn new lessons?  New to unclaimed property reporting?  Consider checking out the Unclaimed Property Professionals' Organization Holder Seminar in Atlanta, Georgia on September 17 & 18.  The agenda can be found here.  As always, the Seminar is designed for beginning and intermediate unclaimed property professionals and address a number of both general and specialized topics.  Full disclosure:  the author is a member of UPPO and will be one of the speakers.  (Completely unrelated aside:  the "Unclaimed Property Buzz" seminar on the first day should be fascinating and entertaining).

Whether you need to learn the basics or sharpen you the skills you've already learned, consider checking it out.

Monday, August 4, 2014

Unclaimed Property Postcard Scams Abound

Unclaimed property administrators in a number of states are warning about an identity theft scheme where the thieves send "Unclaimed Property Notifications" to the public to solicit personal information.  The postcards contain a toll-free number and ask the caller to provide identification information in order to claim the property.  This scam has shown up in Delaware, Kansas, Nebraska, West Virginia, Maine, Kentucky and probably a number of other states.

While these potential scams come in a number of different varieties, here are some tips to (try to) avoid scams relating to unclaimed property:

  • Don't Pay to Search -- States do not charge a fee for allowing you to search for unclaimed funds, or in most cases, even to collect unclaimed funds.
  • Don't Trust Links -- If you receive an email purporting to be from your state unclaimed property office with a link, go to the site directly.  A link to every states' unclaimed property office can be found on the website of the Nat'l Association of Unclaimed Property Administrators.
  • Don't Trust Phone Numbers -- Similarly, don't call the number provided to you in an unsolicited email or voicemail.  Look up (using NAUPA or some other source) the phone number for your state unclaimed property office yourself, and call them directly.  Some scams seek to trick victims into calling an international phone number and incurring high fees for those calls.
  • Don't Provide Financial Information -- You do not have to provide any financial or bank account information to perform a search or to learn if a state is holding unclaimed funds on your behalf. 

Monday, July 21, 2014

Pennsylvania Reduces Dormancy Periods

On July 10, Pennsylvania House Bill 278 was approved by the Governor.  The 112 page budget bill makes a number of legislative changes, but for purposes of this blog the most notable is the reduction in dormancy period for most property types from 5 years to 3 years.

What's behind the Pennsylvania push for shorter dormancy periods?  As usual, it appears to be a response to a nearly $1 billion budget deficit.  According to a Fiscal Study by the Pennsylvania House Appropriations Committee, "it is estimated that the reduction in holding period for the newly identified classes of unclaimed property will generate $150,000,000 in revenue for the General Fund in 2014."

There are a number of problems, however, with this statement:
  • First, with the exception of a clarification regarding IRA accounts, the new legislation does not contain any "newly identified classes of property"; rather, it simply shortens the dormancy period for the classes of property already covered by the Act. 
  • Second, if the legislative purpose of state unclaimed property laws is to effect only a change in "custody" of unclaimed property (i.e., from the holder corporation to the state) allegedly because the state is a better guardian of the funds, than the characterization of these amounts as Commonwealth "revenue" is misleading.  Assuming that the Commonwealth will make all reasonable efforts to reunite its citizens with their unclaimed money (an assumption we won't challenge for purposes of this post) than the "revenue" received by the Commonwealth is temporary at best.

  • Finally, it should be reasonably clear that the shortening of dormancy period itself does not "generate" any unclaimed property.  Instead, it essentially requires holders to triple the years reported next April 15.  That is, instead of reporting all property that is 5 years old, each will report all property that is 5 years old, 4 years old and 3 years old.  The upshot is that the $150 million increase cited is a one time only event, due not to any change in the structure of the Act, but simply because holders next year will be required to essentially report three years worth of property. 
This is yet another example of dormancy periods being modified to produce a short-term, artificial increase in governmental revenue. 

There are a few other notable provisions of the law that we will get to later in the week. 

Friday, April 25, 2014

Delaware to Consider Banning Contingent Fee Auditors?

Corporations and financial institutions that are subjected to an unclaimed property audit often come away from the process with a number of complaints.  The process is usually (very) lengthy, disruptive to ongoing operations, and more often than not, bears precious little resemblance to a process designed to uncover property that will actually go to a rightful owner.  Of all holder complaints about audits, however, the most pervasive and significant is skepticism regarding the states' use of contingent fee auditing firms to carry out the process.  In most instances, instead of conducting an audit through its own unclaimed property department, bank examiner, or other regulator, most states use private auditing firms that collect a percentage of the unclaimed property that they "find."

Many holders question whether an auditor who is given a direct financial stake in the outcome of the audit has the objectivity and independence necessary to conduct a fair examination.  Notwithstanding these objections, the vast majority of states have ignored this critique, claiming that they don't have the resources to enforce compliance any other way. 

Now, a recent announcement from the Delaware State Senate suggests that at least some legislators have noticed.  The Republican Caucus has announced its plan "introduce legislation intended to disallow commission-based contracting for escheat."  The attached press release goes into more detail, and contains some startling (or not, depending on your view) statistics.  According to Senate Republicans, during Fiscal Year 2013 "the state paid Kelmar Associates, a firm that provides government auditing services, $53.4 million, according to the State of Delaware Online Checkbook." 

That's a lot of money, and whether the auditing firms are overly-aggressive or not, it suggests a potential misalignment of state priorities.  If, on the one hand, this huge amount is a product of overly-aggressive auditing (a question upon which this blog takes no position for purposes of this article) this represents a significant amount that companies have paid, but potentially should not have been required to pay, to settle these audits.  If, on the other hand, these amounts are all truly unclaimed property belonging to owners (or failing that, the state) then this seems like a tremendous amount of money that is being diverted from the state and its citizens.

Only time will tell whether this press release represents a huge shift in the way unclaimed property law enforcement is handled or just a PR move to be announced and just as quickly forgotten.  Remember, until the legislative process is complete, this is Just A Bill.

Monday, April 21, 2014

Missouri Considers "Holder-Friendly" Unclaimed Property Legislation

Last week, a unclaimed property bill was introduced in the Missouri House of Representatives that would make significant, and holder friendly, changes to the Missouri Unclaimed Property Act. According to the El Dorado Springs Sun, which recently posted an article about the proposed legislation, the Missouri Chamber of Commerce & Industry is backing the bill, claiming that it "would take Missouri from the bottom four states in the rankings to one of the top 10 states for fair treatment of business unclaimed property.”  

The proposed bill addresses three issues frequently requested on holder wish-lists for unclaimed property administration.  In particular, the proposed legislation would provide the following features:
  • Business-to-Business Exemption -- Bill 1075 would create a business-to-business exemption for items between business associations that have an ongoing customer relationship.  Specifically, the proposed exemption provides that items "issued to a business entity or association as part of a commercial transaction in the ordinary course of a holder's business shall not be presumed abandoned if the holder and such business entity or association have an ongoing business relationship."
  • Three Year Statute of Limitations -- One of the most frequent holder complaints about state unclaimed property laws is the fact that the audit period can go back many years, if not decades.  The proposed Missouri legislation, by contrast, would limit the enforcement statute of limitations, in most cases, to three years from the date of filing the report.
  • Appeals Process -- Finally, the bill would create an appeals process to allow holders to challenge adverse determinations made by the Administrator.
 The bill is still in the very early stages of consideration.  We will continue to follow its progress as updates are warranted.

Thursday, April 17, 2014

Miss the UPPO Annual Conference? Get the Top 5 Takeaways at April 22 Webinar

The Unclaimed Property Professionals' Organization recently held its annual conference in Grapevine, Texas.  Bringing together hundreds of holders, service providers, and other industry professionals, the UPPO conference is a great place for continuing education, networking, and learning the most recent trends and issues in unclaimed property compliance.  If you couldn't make it to Texas, the UPPO is hosting a webinar on April 22 to go over the "Top 5 Takeways" from the conference.  The presentation will cover
  • Latest UPPO organizational developments;
  • A presentation seeking to clarify a number of the ambiguities of unclaimed property compliance;
  • The special compliance issues arising from unclaimed property law in the insurance industry;
  • Recent unclaimed property developments in Canada;
  • Potential future amendments to the Uniform Unclaimed Property Act.
Registration information can be found here.

Friday, March 14, 2014

Lost + Found: States Release New Lists of Unclaimed Property & Georgia Critiqued

Massachusetts Releases Unclaimed Property List . . .  -- Massachusetts State Treasurer Steven Grossman recently announced the release of the Bay State's most recent list of unclaimed properties.  According to the press release, the list contains 45,000 new properties in excess of $100 million collected by the Department during the last six months.  The new list also includes some $20 million in unclaimed life insurance policies discovered during recent audits.

. . . and Nebraska Too -- According to an article in the Lincoln Journal Star the Nebraska State Treasury is preparing to publish the names of an additional 35,000 unclaimed property owners in Husker State newspapers during March and April.

CBS46 Atlanta:  Georgia Not Doing Enough to Reunite Owners With Funds -- We've spent a fair amount of time recently addressing state efforts to reunite owners with their property.  According to a series of special reports by the local CBS affiliate, Georgia is not doing enough to make outreach efforts to owners.  According to the article, the state doesn't publish owner names, hasn't issued a press release in years, and doesn't use social media.  The whole series of articles is well worth a read.

Wednesday, March 12, 2014

West Virginia Adds More Unclaimed Property to State Website

The Office of the West Virginia State Treasurer has announced recent policy changes that increase the amount of unclaimed property appearing on the state's website (and, thus, available for online searches).  According to the Treasury's press release, the threshold for listing property on the website has been reduced from $50 to $25.  The same release notes that the department is soon to release an additional 13,000 items that are being held by the state for West Virginia residents.  Kudos to the Mountaineer State for making efforts to reunite more owners with their property.

Monday, March 10, 2014

Unclaimed Property's "Second Season" Has Begun

Welcome to unclaimed property's "second" (but no less important) season - the Spring reporting period.  In the vast majority of states (approximately 40), unclaimed property reports are due in the fall (October 31 or November 1) for all property deemed abandoned as of the previous summer (June 30 or July 1).  While that crush of reports may create anxious times for unclaimed property professionals, the sizable minority of Spring reporting states contains some heavy hitters.  Among the spring states are (dates are for general corporations - life insurers and other entities may have other dates):

Connecticut - reports due March 31
Delaware - reports due March 1
Florida - reports due April 30
Illinois - reports due April 30
New York - many reports due March 10
Pennsylvania - reports due April 15
Tennessee - reports due April 30
Vermont - reports due April 30

Moreover, given the recent changes to some states' unclaimed property laws, there will be precious little time to breath a sigh of relief after the Spring reporting period ends and the "Summer" reporting period (which did not exist a few years ago) begins in Michigan and Texas.

Wednesday, February 26, 2014

Well, That's Different

In recent years, there have been a number of instances where states have proposed (and sometimes ultimately enacted) laws to change the "dormancy period" for various types of property.  For those still new to unclaimed property law, the dormancy period is the statutorily defined period of time before a "holder" (the entity in possession of the property) may hold it before it must be reported and delivered to the state.  For example, if a state prescribes a three year dormancy period for bank accounts, that generally means that if the account owner engages in no activity in the bank account (e.g., deposits, withdrawals) for three years, the bank must report and deliver the property to the state.

Because shortening the dormancy period has the effect of allowing the state to take custody of unclaimed property sooner, states have frequently resorted to shortening the dormancy periods for unclaimed property to generate more revenue.  For example, Michigan shortened the dormancy period for nearly all property types from 5 years to 3 years.  According to the Michigan House Fiscal Agency this change was projected to result in increased revenue to the state in excess of $200 million.

Against this backdrop, it is little surprise to see that there is a bill pending in the Illinois General Assembly that, if enacted, would change the dormancy period for most property types.  But, there's a twist - House Bill 5823 would actually lengthen the dormancy period for most property types under Illinois law, from 5 years to 8 years.  There is no accompanying legislative report or recommendation (as yet) explaining the rationale for the proposal, but the longer dormancy period would conceivably cut down on the amount of non-unclaimed property that gets swept up into state coffers.

Sunday, February 2, 2014

Delaware VDA Lawsuit Settled - Everything Stays the Same

In April of this year, we noted a lawsuit filed against Delaware's unclaimed property authorities arising out of a Voluntary Disclosure Agreement with Select Medical that became adversarial.  The lawsuit, which was being watched closely by unclaimed property professionals, challenged, among other things:
  • Delaware's use of estimation prior to the enactment of the statute authorizing estimation;
  • Delaware's alleged use of "arbitrary and capricious" estimation methods;
  • the inclusion of non-dormant property in Delaware's estimation procedures; and
  • Delaware's claimed disregard of the Texas v. New Jersey priority rules.
According to The Washington Post, the state and Select settled the case and dismissed all claims against one another.  No further information on the settlement is publicly available.  While this is probably a good outcome for the parties involved, it also demonstrates why there is relatively scant caselaw in the field of unclaimed property:  the vast majority of disagreements between states and holders are settled without litigation (or, at least, settled before any case is litigated to a conclusion).  So, despite six months or so of litigation, and doubtlessly thousands in legal fees, the questions and issues listed above remain unresolved.

Monday, January 27, 2014

Vermont Attorney General Warns of Facebook Unclaimed Property Scam

An article in the (Vermont) Valley News reports a warning from the Vermont Attorney General's Office concerning an unclaimed property scam making the rounds in the Green Mountain State (and perhaps elsewhere).  The scam apparently involves contacting the Facebook "friends" of a compromised account, informing them that they have unclaimed property, and providing a call-in number.  Individuals who contact the number are advised that they have unclaimed funds, and are asked to wire money to pay for taxes and fees.

Here are some tips to (try to) avoid scams relating to unclaimed property:
  • Don't Pay to Search -- States do not charge a fee for allowing you to search for unclaimed funds, or in most cases, even to collect unclaimed funds.
  • Don't Trust Links -- If you receive an email purporting to be from your state unclaimed property office with a link, go to the site directly.  A link to every states' unclaimed property office can be found on the website of the Nat'l Association of Unclaimed Property Administrators.
  • Don't Trust Phone Numbers -- Similarly, don't call the number provided to you in an unsolicited email or voicemail.  Look up (using NAUPA or some other source) the phone number for your state unclaimed property office yourself, and call them directly.  Some scams seek to trick victims into calling an international phone number and incurring high fees for those calls.
  • Don't Provide Financial Information -- You do not have to provide any financial or bank account information to perform a search or to learn if a state is holding unclaimed funds on your behalf. 

Friday, January 17, 2014

Friday Lost + Found: UPPO Annual Conference & Unclaimed Funds in Cleveland

UPPO Annual Conference Registration Open -- The Unclaimed Property Professionals' Organization is the primary group representing the interests of holders of unclaimed property.  One of UPPO's most valuable resources is its annual conference, a 3 day event with educational seminars, networking events, and discussions with state administrators and other experts.  This year's conference will be held from March 23-26 in Grapevine (Dallas) Texas.  Registration information can be found here.

Cuyahoga County Releases List of Unclaimed Funds -- State governments are not the only entities that hold unclaimed funds.  As reported by an internal audit of the Cuyahoga County's Clerk of Courts office identified some $7 million in unclaimed funds owed to residents.  A searchable list is available at the County Clerk's website.

Wednesday, January 8, 2014

Nice Problem to Have: South Dakota Governor and Legislature Discussing How to Spend "Extra" $35 Million in Unclaimed Property

The Rapid City (SD) Journal recently published a story concerning a tug of war between the South Dakota Governor and State Legislature concerning how to use an "unexpectedly large" collection of unclaimed property.  According to the article, the state collected almost $70 million in unclaimed property during the past year - more than $33 million more than expected.  The windfall is apparently due to the state's recent decision to shorten the dormancy period for most property types from 5 years to 3 years and the movement into South Dakota of certain companies and financial institutions.  As we previously noted, that same legislation also reduced the number of published notices to owners from two to one, and increased the dollar threshold for publishing such items from $50 to $250.  The shortening of dormancy periods and increase in notice threshold are becoming regular tricks for states to (temporarily and artificially) increase state revenue.

According to the Journal article by Bob Mercer, the legislature wants to use the extra cash for economic development, while the governor wants to use the money to pay off some existing state debt.  As is often the case, neither side is suggesting that the funds be used to increase outreach efforts to get the money back to its rightful owners.