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Unclaimed Property Focus
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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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UPPO Asks: What one thing would you change about unclaimed property?

Posted By Administration, Thursday, May 19, 2016

Periodically, UPPO asks members to respond to a question, sharing their ideas, insights, and experience. The recurring UPPO Asks feature is a compilation of their responses.

 

We recently asked several members: “If you could change one thing about unclaimed property what would it be?”

 

“The audit process: I would like the audit firms to be required to present the state reporting criteria to the audit target, before the audit is in full swing. This way the audit firm cannot twist the requirements to benefit themselves later on down the road. I know this is a pipedream, but it is what I’d like to see change.”— Lori Fitzgerald

 

“Like everyone else, the change I would make would be to have more consistency and uniformity in the laws.”— Anne Furdon

 

“If I could change one thing about unclaimed property it would be to standardize the due diligence mailing windows and remittance dates across the states. That is, states would change the due diligence mailing windows and their remittance days to all fall in, say three mailings and remittances per year. This would make things significantly easier administratively.”— Ryan Dowd

 

“I would request that all U.S. unclaimed property jurisdictions have a statute of limitations of no more than 10 years.”— Evi Magnusson

 

Now it’s your turn. What is the one thing you would change about unclaimed property? Add a comment below to share your response.

Tags:  unclaimed property  UPPO Asks 

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Litigation update: California judge rules that merchandise return certificates are considered gift certificates in Bed, Bath & Beyond case

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Thursday, May 12, 2016

Bed, Bath & Beyond Inc., Plantiff v. John Chiang, California State Controller, Defendant (Superior Court of California, County of San Diego)

 

Background

Like many retailers, Bed Bath & Beyond Inc. (BB&B) issues merchandise return certificates (MRC) to customers that have no original receipt but would like to return merchandise. The MRC terms indicated they can only be used at BB&B or affiliates, are not redeemable for cash, do not expire, and in order to redeem the certificate, the MRC must be used to purchase merchandise at BB&B and present the MRC.

From 2004 to 2012, BB&B reported and remitted MRC property that had sat dormant for three years to California equal to the full unredeemed balances of the MRC issued to California customers. In total, $1,834,477.62 was remitted to California.

 

BB&B requested a refund from California claiming it mistakenly remitted MRC funds to California, and when California wouldn’t grant the refund request, BB&B filed suit against California and Controller John Chiang.

 

Ruling
On March 4, 2016 a Superior Court of California judge entered a favorable order to the plaintiff, finding that MRC are deemed a type of gift certificate under California unclaimed property law.  Highlights of the order handed down by the judge are as follows:

  • If property isn’t owing to owner it’s not escheatable: The defendant alleged that the property was properly escheated, and argued that MRC are a type of “intangible personal property” escheatable under California unclaimed property law. The court disagreed, stating that only intangible property that is actually “owing” to an owner is escheatable.  Further, the order stated that “The Court concludes that because the MRCs are not redeemable for cash, the Plaintiff does not owe money to the owner of an MRC.” 
  • MRC do qualify as a gift certificate: The court agreed with the plaintiffs that MRC qualify as gift certificates, and stated two specific reasons for qualification:
  • BB&B’s MRC had the same characteristics as a more traditional gift certificate or card that’s labeled “gift certificate” or “gift card”; and  
  • The order noted that the law recognizes gift certificates in circumstances other than purchases as a gift.  For example, the court stated that “gift certificates” under the law include those distributed by the issuer to a consumer pursuant to an awards, loyalty, or promotional program. 

 

Impact on unclaimed property compliance

Once the final judgment is entered, this will provide additional clarity to the property that is covered under California unclaimed property law. With the limited published legal opinions on this topic, it’s advised to consult each state’s law before altering compliance policies.  

 

Next steps
The judge has not entered a final judgment in the case, and once the final judgement is issued, the defendant has 60 days to file an appeal, if they so choose.

 

About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    

 

 

Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

 

Tags:  bed bath and beyond  litigation  merchandise return certificates  unclaimed property 

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State legislatures consider dormancy period changes

Posted By Administration, Tuesday, May 10, 2016

As many state legislative sessions continue, one of the continued trends affecting unclaimed property professionals is a movement to change dormancy periods. Bills in Connecticut, Pennsylvania and Illinois seek to either extend or decrease the dormancy period for specific property types.

 

“Bills that increase the dormancy periods on certain types of property held by financial institutions recognize that, with regard to certain types of accounts, owners need more time before their funds are remitted to states as unclaimed property,” says Karen Anderson, vice president, reporting compliance at Keane and co-chair of UPPO’s government relations and advocacy committee. “Many consumers ‘set and forget’ these accounts intentionally, and the intentions of consumers must be balanced against the state’s interests in trying to protect them.”

 

Connecticut

The Connecticut House of Representatives is considering H.B. 5533, which would extend the dormancy period for funds held by a bank or financial institution from three years to seven years. The bill was assigned to the Joint Committee on Finance, Revenue and Bonding on April 19 and awaits action.

 

Pennsylvania

In Pennsylvania, H.B. 2005 would amend the state’s Unclaimed Property Law, extending the dormancy period from three years to seven years for demand, savings or matured time deposits in a financial institution and funds paid toward the purchase of shares or other interests in savings associations. On April 19, this bill was referred to the House Finance Committee.

 

Illinois

In Illinois, H.B. 4601 would extend the dormancy period from five years to eight years for property held by a bank or other financial institution. The bill also specifies that property is not presumed abandoned when certain actions occur:

  • A federal taxable interest statement sent to the owner was not returned;
  • A dividend check was cashed; or
  • Any automatic transaction took place.

 

On April 22, H.B. 4601 was re-referred to the House Rules Committee, where bills often stall.

 

Two additional bills, H.B. 6074 and S.B. 2783 would decrease the dormancy period for property held by any federal, state or local government or governmental entity from seven years to five years. On April 12, the House passed H.B. 6074 and the Senate passed S.B. 2783. On April 18, H.B. 6074 had its first reading by the Senate and was referred to Assignments, while S.B. 2783 passed the House Judiciary — Civil Committee on May 4 and subsequently placed on the House calendar for a second reading.

 

H.B. 5607 seeks to establish a dormancy period for savings bonds issued by the U.S. Treasury. Under the bill, a savings bond would be presumed abandoned when it has remained “unclaimed and unredeemed for five years after its date of final extended maturity.” The House passed H.B. 5607 on April 19. It received its first reading in the Senate on April 27, passed the Senate Judiciary Committee on May 4 and was placed on the Senate’s calendar for a second reading.

 

H.B. 3830 establishes rules for forming, operating and regulating not-for-profit co-ops. The bill includes a provision specifying that any “unclaimed stock or other equity interests, dividends and patronage allocations” would be considered forfeited and become the co-op’s property if the owner cannot be found within three years. The bill currently awaits action by the House Rules Committee.

 

UPPO continues to monitor all of the pertinent bills affecting members. For the latest information about these and other noteworthy unclaimed property bills, visit UPPO’s govWATCH website.

 

Tags:  dormancy  legislation  unclaimed property 

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Protecting Attorney-Client Privilege

Posted By Administration, Thursday, May 5, 2016

An important part of the U.S. legal system, attorney-client privilege provides individuals and companies with the ability to communicate openly with their legal counsel. However, protecting this privilege and preserving confidentiality requires a concerted effort by attorneys and their clients. Just because someone shares information with a lawyer doesn’t automatically mean it’s protected. Here are some practical tips for ensuring confidentiality:  

 

Mark privileged documents

One of the most basic steps to protect information shared with an attorney is properly marking documents and communications. For physical documents, clearly label pages with a stamp or include a page header that specifies the document is confidential. For electronic documents, labeling may be included as part of the file name. When possible, prevent documents from being opened without a password.

 

Mark only documents where there is a legitimate privilege claim. Many items are not subject to attorney-client privilege, including facts, public documents, drafts of documents, attorney notes and invoices. As such, these should not be marked as protected documents. Those that should be marked include communications containing advice, strategy, liability estimates, and observations, including discussions on data sufficiency and audit methodology.

 

Clearly label how the document relates to the provision of legal advice (“in anticipation of litigation,” for example), and avoid mixing business and legal advice. Because attorney-client privilege applies only to legal advice—not business advice—explaining why the content is legal advice and segregating that content from business advice helps protect the information. 

 

“Whatever system you choose to use for labeling privileged documents, apply it consistently and accurately,” Lynn Gandhi, Esq., partner at Honigman Miller Schwartz and Cohn says.

 

Keep documents confidential and discuss privilege with the team

Share confidential documents only with people who have a legitimate need to see them. Labeling documents as “confidential” will not sufficiently provide protection if they are widely available or shared with people who don’t need access. Keep confidential documents in a secure location with limited access. When sharing information by email, specify at the beginning of the message that the communication should not be forwarded and additional people should not be added to the chain of email responses. 

 

Because unclaimed property touches so many areas of the company, designating the lead in each area and having a serious, detailed discussion about maintaining confidentiality is important.

 

“People need to understand that you might not share information with them,” Gandhi says. “It’s not because you’re mean or you’re not being collaborative. It’s not a personal slam. If too many people are brought into the ‘circle of trust,’ you can lose your privilege.”

 

Follow attorney guidance

If any questions or confusion exists regarding who should be brought into discussions or given access to documents, follow guidance from legal counsel. Whether it’s internal employees or external consultants, additional people may occasionally need to be given access to some confidential information. Don’t make assumptions. Let your attorney take the lead, and don’t discuss sensitive issues with anyone unless directed to do so by the attorney.    

 

Maintain a privilege log

To help demonstrate that sensitive documents have been properly protected, keep a privilege log. Track who has seen or been given access to each document. If questions arise about whether information is truly subject to attorney-client privilege, the log will reflect that documents are not simply marked as confidential, but have been accessible only by those who truly needed to see them.

 

Attorney-client privilege is a valuable right. When undergoing an unclaimed property examination, it’s important for companies to have open, frank discussion with their attorneys without fear of the information being used against them.

 

“It really is a very important privilege because it allows you to talk in confidence to someone you trust without any pushback from government and within a zone of confidence,” MJ Wilson-Bilik, Esq., partner at Sutherland Asbill & Brennan says. “If you do it right, you can have discussions without having to share them with the world.”

 

Tags:  audits  unclaimed property 

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Life insurance in the news

Posted By Administration, Thursday, April 28, 2016

Since the airing of the “60 Minutes” piece on unclaimed life insurance benefits life insurance has been crossing publication headlines. Below is a roundup of some of the articles we’ve found about the topic.

 

Florida life insurance law lands on ’60 Minutes’
WGCU

Forcing Insurers to Search for Beneficiaries is Fixing the Wrong Problem
InsuranceNewsNet

U.S. Sen. Dick Durbin Calls on Kemper to Change its Practices

U.S. Sen. Durbin’s online newsroom

200,000 Consumers Receive $5 billion Resulting from Insurance Commissioners’ investigation
California Department of Insurance press release

MassMutual has Proactively Checked the DMF for Decades
Mass Mutual press room

ACLI Supports National Standard on Unclaimed Benefits
ACLI newsroom 

Stay in touch with emerging legislation and regulations impacting the life insurance industry with govWATCH, our legislative and regulatory tracking system.

Tags:  DMF  life insurance  unclaimed property 

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