New York Finds $1.67M in Unclaimed Funds Belonging to . . . New York? A Lesson in Claiming

According to an article in Monday's Daily News by Erin Durkin, New York City Public Advocate Letitia James and her staff found over $1.67M in over 2,000 accounts held by the New York Office of Unclaimed Funds on behalf of New York City agencies, departments, and organizations.  As the article notes, many of the accounts may have been missed in earlier reviews by the City because of owner names in the state database that might have been abbreviated or misspelled.

The article raises an important lesson for owners searching the state's database for unclaimed property -- the information in the state's database is only as good as what gets reported.  If an owner's name is abbreviated or misspelled on the holder's report, it will probably be that way on the state's database.  So, in searching for your property, don't forget to try common or likely misspellings or abbreviations of your (or your company's) name.  For example, if you were searching for property held for the Alphabet Boat & Cargo Corporation, you might be well advised to run searches for all of the following:

• Alphabet Boat & Cargo
• Alphabet Boat and Cargo
• Alphabet Boat + Cargo
• Alphabett Boat Cargo (or other misspellings)
• Cargo, Alphabet Boat (in case reported in Last Name, First Name format) 
• ABC Corp
• ABC Company

The article also serves as a reminder to holders to try to report owner names accurately and consistently.  Doing so will make it more likely that the owner can locate his or her property in the future.

Friday Lost + Found: Australia Amendments, NY Numbers, Escheat Events

Australia to Revise Bank Account Rules -- According to an article om News.com.au, the Australian government is considering legislation to (re)revise its laws relating to unclaimed bank accounts.  Under the current rules, certain bank accounts are deemed unclaimed if there has been no activity for 3 years.  The proposed revisions would change the period of inactivity required to 7 years.

New York Holding $14B in Unclaimed Property -- Every once in a while, we like to keep tabs on the current amount of money being held by the states' as unclaimed property.  According to one recent article, the amount currently held by the New York Office of Unclaimed Funds for New Yorkers is $14 billion as of fiscal year end March 31.

Upcoming UPPO Webinar on Recovering Property -- Though we spend the vast majority of time on this site writing about the process of reporting and remitting unclaimed property, it is worth remembering that most holders of unclaimed property are also owners of unclaimed property held by others.  On October 14, the Unclaimed Property Professionals' Organizations is sponsoring a webinar on "How to Recover Property for Your Company".  Webinar details and registration information can be found at the UPPO website.

Delaware Audit / VDA Bill Signed by the Governor

Earlier this month, we mentioned the legislative approval of Delaware Senate Bill 141. The bill has now been signed by the Governor and enacted into law.  As noted earlier, the legislation extends voluntary disclosure program run by the Secretary of State, and implements some new audit practices, including:

• limiting the lookback period for audits already underway to January 1, 1986;
• limiting the lookback period for new audits to January 1, 1991; and
• beginning in 2017, limiting the lookback period for new audits to 22 years.

Senate Bill 141 Passes House, Awaiting Executive Action

Early this morning Delaware Senate Bill 141 passed the House, and now is ready to be signed by the Governor.  If passed, the bill would make some significant changes to the First State's audit practices and would further extend the voluntary disclosure program run by the Secretary of State (which is closed at the moment, but would become permanent if the law passes).

As to the state's audit practices, the new legislation:

• limits the lookback period for audits already underway to January 1, 1986;
• limits the lookback period for new audits to January 1, 1991; and
• effective January 1, 2017, limits the lookback period for new audits to 22 years

The bill also reopens the Secretary of State's VDA program, and provides that any holder entering into the VDA program by December 31, 2016, and agrees to pay within 2 years of entry will have its records reviewed back to the "transaction" year 1996.  Holders enrolling thereafter would have similarly have a 19 year lookback period.

The law provides that no new audits will be commenced until such time as the Secretary of State notifies the holder of the ability to enter into the VDA program, and the holder fails to do so within 60 days.


On the negative side for holders, effective March 1, 2016 the bill also reinstates interest on overdue amounts at 0.5% per month unless (up to 25% of the amount to be paid) unless the failure to pay "is due to reasonable cause and not willful neglect."

Legislative Updates - Updates from Texas, Nevada, and Maine

Texas Lowers Aggregate Reporting Threshold . . .  -- Texas Senate Bill 1021 lowers the aggregate reporting threshold from $50 to $25, effective September 1, 2015.

  . . . And Provides for Cash Redemption of Certain Low Value Gift Cards -- Also in the Lone Star State, Texas House Bill 2391 provides that consumers may obtain a cash refund for stored value cards with balances of $2.50 or less after purchase.

Nevada Enacts Business-to-Business Exemption -- Nevada Senate Bill 348 enacts a business-to-business exemption, providing that certain credits (but not checks) among businesses need not be reported if there is an ongoing business relationship between the parties.

Maine Enacts Savings-Bond Escheat Bill -- Maine Senate Bill 320 extends the provisions of that state's unclaimed property act to matured U.S. Savings Bonds. 

West Virginia Supreme Court Rules That Insurers Must Track Policyholder Death Information

The West Virginia Supreme Court of Appeals recently issued an opinion in Purdue v. Nationwide Life Insurance Company, a case presenting the issue of whether a life insurer is required to undertake periodic investigations to determine whether any of its policyholders are deceased.

The case began in 2012, when West Virginia State Treasurer John D. Purdue sued ten life insurers, claiming that they failed to report and deliver unclaimed insurance policies in accordance with the West Virginia Unclaimed Property Act.  Specifically, the Treasurer alleged that because the insurers did not regularly review in-force policies against the Social Security Death Master File (DMF) to determine whether the policyholder was deceased, they failed to report property when due.  The Treasurer's office sued dozens of additional insurers in 2013, making similar allegations against a total of 69 separate companies.  The insurers contested the Treasurer's theory, generally arguing that as a contractual matter, the policies at issue were payable upon notice and proof of the insured's death.  The insurers further noted that they were under no statutory obligation under the West Virginia Unclaimed Property Act or otherwise to undertake searches of the DMF.

In December of 2013, a West Virginia court dismissed the Treasurer's lawsuits, siding with the insurers and ruling that there was no affirmative legal duty to search the DMF.  The Treasurer appealed the decision to the West Virgina Supreme Court, which ruled in favor of the Treasurer and sent the case back to the lower court for further proceedings. 

In the Supreme Court's view, it was undisputed that unclaimed life insurance policies were escheatable three years after the insurer's obligation to pay arose; rather, the case boiled down to when the obligation to pay arose.  According to the Treasurer, the obligation to pay arises when the policyholder dies.  According to the insurers (and the lower court) the obligation to pay does not arise until proof of the insured's death is provided to the insurer.

The Supreme Court began its analysis by reviewing Section 2(e) of the West Virginia Act, which generally provides that property is payable "not withstanding the owner's failure to make [a] demand" for payment.  That language, the Court explained, undercut the insurers' argument that an insurance policy cannot be payable until such time as a claim is filed.  In so doing, the Court distinguished cases in other states requiring a claim on the grounds that those cases simply held that an insurer had no obligation to search the DMF, not that the obligation to pay doesn't arise until a claim is made.

Having made that distinction, however, the Court was left with the following question:  How is an insurer to obtain information regarding policyholder deaths if there is no affirmative duty to search the DMF?  Indeed, the Court explicitly held that the West Virginia Unclaimed Property Act "imposes no specific duty on insurers to search the [DMF] or any comparable data source."  The Court largely punted back to the insurers on this issue - holding that the dormancy period commences with the death of the insured and that the insurers could do whatever they want to determine when a policyholder death takes place.  Of course, the insurers could search the DMF, the Court explained, but they could also "contact its insureds directly" (e.g., call them every year), farm the task out to agents, or do whatever else the found "the most economical" so long as they obtained the required information.

The Supreme Court sent the case back to the lower court to allow the Treasurer's office to continue its examination of the insurers' records. 
  

A "Star Wars Day" Update

Today, May 4th, is Star Wars Day ("May the Fourth be with you").  Little known fact:  According to the State of Texas unclaimed property database.  The Lone Star state is in possession of funds for Darth Vader (last-known address:  The Death Star).

Apparently, mail sent to the Death Star was returned as undeliverable.  Must have been after the Battle of Yavin.

Happy Star Wars Day!

Legislative Updates Relating to Life Insurance, Savings Bonds, and Dormancy Periods

Death Master File Searches -  Idaho Senate Bill 1023 was enacted in March, to come into effect on July 1, 2016.  Arkansas Senate Bill 768, a similar bill, was enacted earlier this month, to come into effect June 30, 2016.  Utah House Bill 168 comes into effect in July of this year.   These laws require, among other things, life insurers to do a search of in-force policies against the Social Security Death Master File on a semiannual basis.

Extension of State Unclaimed Property Acts to U.S. Savings Bonds -- Indiana Senate Bill 282 and Arkansas Senate Bill 356 apply the unclaimed property acts in those states to U.S. savings bonds that have stopped earning interest, or matured, respectively.

Dormancy Period Changes -- Arkansas House Bill 1782 reduces the dormancy period for certain corporate bonds, deposit accounts and mineral proceeds from 5 years to 3 years.

Unclaimed Property Provides Boost to South Carolina Budget

The Charleston Post & Courier has an article about the boost provided to South Carolina's budget as a result of unclaimed property collections.  Just as lawmakers were putting the finishing touches on the state budget, State Treasurer Curtis M. Loftis, Jr. announced that unclaimed property estimates for the year would rise by nearly $50 million.  The article notes that some of the excess resulting from unclaimed property and other increases was used to reduce cuts to educational and hospital programs.

Court Renders Federal Preemption Decision in Temple Inland - Case to Continue

Earlier this summer a company called 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 alleged 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 (that is, that the court should not even hear the dispute) and Temple-Inland responded by asking the Court for summary judgment (an order that Plaintiff is entitled to judgment as a matter of law, without the need for a trial) on the grounds of federal preemption.

Wednesday afternoon, the trial court issued its decision on the dueling motions.  In sum, both parties' attempts for a quick knockout were largely rejected, and the case will continue.  The one substantive decision that the Court made relates to federal preemption (i.e., the argument that federal law displaces contrary state law).  The Court expressly rejected T-I's argument that federal preemption prevented Delaware from employing estimation to assess historical unclaimed property liabilities.

The Federal Preemption Decision
In numerous cases, the Supreme Court has held that a state's jurisdiction to take custody of unclaimed property relates to the debtor-creditor relationship between the holder and owner of unclaimed property.  In Delaware v. New York, for example, the Court held that the determination of which state was entitled to escheat property started with a determination of the "precise debtor-creditor relationship" that gave rise to the property.   In the T-I case, Temple Inland argued that the use of estimation to calculate unclaimed property liabilities (where no exact debtor-creditor relationship is shown) was preempted (i.e., prohibited) by federal authority relying on the existence of this debtor-creditor relationship, and similar authority refusing to use statistical estimates to apportion unclaimed property among the states in lieu of the Texas v. New Jersey priority rules.  T-I also argued that, although the Texas v. New Jersey and Delaware v. New York holdings arose in the context of disputes between states, the Supreme Court's holdings in those cases were nonetheless applicable to disputes between a state and a holder.

The Delaware District Court rejected this argument and dismissed T-I's federal preemption claim.  In so doing, the court reasoned that the since the "stated purpose" of the Texas v. New Jersey priority rules was to "apply to disputes among States, not to disputes between private parties and States" there was no relevant federal law to preempt Delaware's enforcement of its unclaimed property act.  Accordingly, the District Court avoided the need to determine whether estimation itself was preempted via federal law by finding, in effect, that there was no applicable federal law at all.  The court's holding regarding federal preemption necessarily resulted in the denial of T-I's motion for summary judgment.

The Case Will Continue
As to the remainder of T-I's claims, the court held that the complaint stated a set of facts that, if proven, might entitled T-I to relief, and thus denied the remainder of Delaware's motion to dismiss.  The case will now continue.

Friday Lost + Found: Happy Unclaimed Property Day and Kentucky & California Questions

Kentucky State Treasurer Defends His Post -- Kentucky.com has an article about Kentucky Treasurer Todd Hollenbach's defense of the position of State Treasurer.  Although term limits prevent Hollenbach from running again, a according to Kentucky.com some candidates for the position of State Treasurer seek to abolish the office - arguing that the various tasks can be handled by other government departments.

California Legislative Analysts' Office: California Can Do More to Return Unclaimed Property -- The LA Times is reporting on a release by the California Legislative Analyst's Office (LAO) noting a potential conflict between the California Controller's Office's obligation to return unclaimed money to California citizens, and the revenue generated by the more than $400 million in revenue that unclaimed funds contribute to the state budget.

February 18 Was Unclaimed Property Day in South Carolina -- According to WMBF, February 18 was declared "Unclaimed Property Day" in South Carolina by that state's General Assembly and State Treasurer Curtis Loftis.  To be your own Santa in South Carolina, you can check the Treasury;s "Palmetto Payback" program here.

On Second Thought, Never Mind -- NJ Repeals Gift Card Data Requirement

Perhaps we can now tie a bow on the long-running New Jersey gift card saga.  First, a brief refresher:

In 2012, Governor Christie signed Senate Bill 1928 into law, which revised New Jersey's 2010 gift card legislation.  Briefly, the bill extended the dormancy period for gift cards from 2 years to 5 years, and delayed implementation of a requirement that retailers obtain zip code information at the point of sale for 4 years.  While many gift card issuers applauded the amendments, not everyone was happy.  In particular,  the some holders and gift card issuers favored legislation that would remove gift cards from the New Jersey unclaimed property act entirely or, at least, to eliminate the zip code collection requirement.  As a NJ BIZ article recounts, however, repealing legislation got watered down on the State House floor. 

After more than 2 years of legislative wrangling, the issuer and holder communities got (at least part of) what they were looking for.  On February 5, Governor Christie signed Senate Bill 2235 into law.  The law eliminates the provision of the New Jersey Unclaimed Property Act previously scheduled to come into force in 2016, requiring card sellers to obtain zip code information at the point of sale.

Delaware Adopts Some Unclaimed Property Task Force Recommendations

At the start of the year, we noted that the Delaware Unclaimed Property Task Force issued a report suggesting certain reforms to the state's unclaimed property practices and procedures.  Unfortunately, many of the high-profile recommendations (e.g., limiting lookback periods, implementing a new VDA program, implementing a statute of limitations) did not make it through the legislative process.  Instead, the Delaware legislature recently passed Senate Bill 11 (as amended) which implements some far more modest changes to the state's rules.  In particular, the new law provides that the Department of Finance can not give more than 50% of its outside audits to the same auditing Firm, sets forth a 2 year "cooling off" period before former unclaimed property staff can join auditing firms, and makes some minor changes to the state's administrative appeal process.

While these are all positive developments, they likely fall short of what the holder community was looking for.

Note to States: The DMF is Not Infallible

Since the widespread audits of life insurance companies' unclaimed property compliance became public knowledge in 2011, there has been copious ink spilled on discussion regarding the Social Security Death Master File.  The macabre-sounding index is not the central plot point of a horror movie, it is a database file maintained by the Social Security Administration that tracks deaths reported to the SSA.  That information, in turn, is used for a number of purposes by government agencies and private industry. 

In more recent years, the DMF has also become a new (if controversial) tool of unclaimed property auditors and states seeking to recover property that does not otherwise meet the black-letter presumption of abandonment set forth in state unclaimed property laws.  (The propriety of such a practice is a topic for another day).  At a minimum, however, Fox has an article that proves that resort to the DMF is not panacea for the states or holders. According to Fox, a 94 year old Ohio man is being stopped from filing his taxes because the IRS thinks he's dead.  The culprit?  According to the article, the reason that the IRS refused to accept the return "was because the filer was dead according to the Social Security Administration."

While similar errors can likewise happen with holder records, the article is a reminder that no test or tool is infallible, and generalizations made by auditors and states during the audit process are just that -- generalizations that must always be subject to rebuttal.   

Unclaimed Property Laws Even Trip Up Government Entities

Private companies are not the only ones with the obligation to comply with unclaimed property laws.  In many states, the escheat laws also apply to state, municipal, and local government entities.  For example, under the Uniform Unclaimed Property Act of 1995, property held by a "court, government, governmental subdivision, agency, or instrumentality" is escheatable 1 year "after the property becomes distributable."  (Section 2(a)(11)).  Just like private entity holders, government entities have an obligation to report and remit unclaimed property to the appropriate state agency, and, just like private entities, government organizations can be audited.

According to an article in the Albany Times-Union, one recent audit by the New York State Comptroller's Office of Columbia County, New York discovered nearly $50,000 in unclaimed property that should have been, but was not, reported and remitted to the state.  According to the article, most of the property came from mortgage foreclosure proceeds, abandoned bail funds, and other court deposits.  This is not an isolated incident.  A few years ago, we mentioned a California grand jury who made similar findings of noncompliance relating to several municipalities in California.  Similarly, a review of the Philadelphia Sheriff's Office uncovered up to $50 million that should have been reported to the state.

Both private companies and government agencies need to ensure that they have appropriate policies and procedures in place relating to unclaimed property.  More importantly, they need to make sure that those policies are followed.

Friday Lost + Found: Lone Star Gift Cards, Wisconsin Auction, Delaware Followup

Texas Announces $12M in Unclaimed Gift Cards Available -- NBC 5 (Dallas/Fort Worth) is reporting that the Texas State Controller's office has about $12 million in abandoned gift cards awaiting reclaim at state offices.  The article even has a document from the Controller's office indicating the businesses that have reported such funds.

Wisconsin Dept. of Revenue Unclaimed Property Auction -- People deposit all kinds of stuff in safe deposit boxes -- jewelry, stamps, coins, collectibles -- and sometimes they abandon them.  That stuff eventually makes its way to state unclaimed property offices.  But what does the state do with those items?  In some cases, the answer is auction the items to the public.  The Wisconsin Department of Revenue is currently running an online auction until January 20.  Items can be viewed and bid upon online.

Delaware Legislation Proposed With Task Force Recommendations -- Our last post talked about the recommendations of the Delaware Abandoned Property Task Force and wondered aloud if any action would be taken in response to the group's recommendations.  Recently, Senate Bill 11 was proposed in the legislature, which would adopt some of the Task Force's recommendations.

New Year, New Delaware?

Happy New Year from the staff here at Escheatable.  In case you missed it over the holidays, the Delaware Unclaimed Property Task Force recently issued its recommendations on making the Delaware audit process more fair, efficient and transparent.  Delaware Online has a copy of the complete (and annotated) report and it is well worth a read for those with Delaware audits in progress or looming.  Highlights include recommendations to shorten the look-back period for audits, increase audits done by state employees (as opposed to third-parties), and to modify certain audit and appeal procedures.

Note that while the Task Force's recommendations are generally a positive development, they are in no way binding on the State, the Department of Finance, or the third-party audit firms employed by the state.  Instead, the report will be shared with state legislators and officials in the hope of spurring a legislative solution.