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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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Court Rules California Unclaimed Property Guidance Are Invalid Regulations

Posted By Administration, Thursday, September 6, 2018

Judge Harold Kahn with the California Superior Court in San Francisco ruled two California unclaimed property regulations invalid on July 18, 2018, saying the state controller had improperly adopted them. 

 

According to the court order granting summary judgment in the case of Thrivent Financial for Lutherans v. Betty T. Yee, et al., Case No. CGC-15-548384, the California controller imposed two pieces of “guidance” as regulations without following state requirements for adopting regulations.

  • The state’s “External Database Regulation” required life insurers to compare its insureds’ life insurance policies or other records against the Social Security Administration’s Death Master File or similar database to determine whether any insureds were deceased in order to comply with California Unclaimed Property Law obligations.
  • The “Dormancy Trigger Regulation” required that a life insurance policy is reportable as unclaimed property under the California Unclaimed Property Law no later than three years after the insured had died, even if less than three years had elapsed since the insurer’s records disclosed that the insured had died. 

The regulations appeared in the September 2013 Holder Handbook, issued by the controller’s office. Insurer Thrivent Financial filed suit in 2015, arguing that they were improperly adopted. Defendant Betty Yee, in her role as California controller, responded that the Holder Handbook was intended to provide best practices and was not intended as regulations.

 

The court disagreed with the defendant and ordered the controller’s office to remove reference to the regulations from any materials it disseminates to life insurance companies “unless accompanied by a conspicuous disclaimer that the purported requirements of the two regulations are merely defendants’ views and do not have any legal effect.”

 

The ruling also allows the defendant to take steps to comply with the state’s Administrative Procedure Act in order to properly enact the regulations. 

 

In addition to the immediate effect on life insurers complying with California laws, the ruling raises issues about guidance published by other state and federal agencies. Treatment of such guidance as requirements rather than informal opinions could be problematic, and could be subject to scrutiny as a result of the Thrivent decision. 

Tags:  California  dormancy  life insurance  litigation  thrivent financial 

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California Legislature Considers Voluntary Disclosure Program

Posted By Administration, Thursday, April 5, 2018

A.B. 2773, a bill under consideration by the California Assembly, would establish a voluntary disclosure program in the state. If passed, the statute would require the state controller to create a program following several requirements similar to those in other state voluntary disclosure programs. They include:

  • The program would be open to holders out of compliance with applicable unclaimed property reporting deadlines if they are not already under audit when applying to participate.
  • Participating holders would be expected to review their records and report obligations to the state for the previous 10 years. 
  • The controller would waive interest and penalty charges for holders completing the program in good faith and coming into compliance.
  • The holder would not be subject to audit for the period covered by the voluntary disclosure agreement (VDA) unless the controller reasonably determines the holder has made a fraudulent or willful misrepresentation. 
  • Payment to the state for outstanding liabilities would occur within 12 months from the VDA filing date or another date determined by the controller. 

If adopted, the program would begin on Jan. 1, 2019, and would remain in effect until Jan. 1, 2024, unless extended by statute. 

 

On March 15, 2018, UPPO notified bill author Assemblyman Dante Acosta of its support for the bill and availability to provide expert testimony or other assistance regarding the legislation and its subsequent implementation. 

 

A.B. 2773 is scheduled for an April 10 hearing by the assembly’s judiciary committee. UPPO members can track the progress of this bill and all active unclaimed property legislation nationwide via our govWATCH service

Tags:  California  legislation  VDAs  voluntary disclosure agreements 

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Fraud originating from the California preliminary report is still an issue

Posted By Administration, Thursday, January 28, 2016

Last spring we reported on the issue of fraudsters attempting to claim property as the rightful owner. These fraudsters are using the data published from the California Preliminary Report to get holders’ contact information and sending fraudulent claim letters attempting to receive money not rightfully owed to them.

Below are red flags and tips to keep you mindful of the possibility, published in the California spring 2015 newsletter

Keep these tips in mind prior to releasing funds:

1) A holder should always request that the property owner provide proof of association to the property, such as:

  • Photo identification;
  • Proof of reported and/or current address; and/or
  • Proof of entitlement

2) A holder should always have a system in place to validate any documents provided.

 

3) A holder should always exercise caution any time a property owner:

  • Requests to change the reported address;
  • Requests a wire transfer (especially overseas);
  • Is irate and not willing to go through the claims process;
  • Threatens legal action; and/or
  • Changes his or her story

What to do when you believe the person doesn’t demonstrate ownership?

In these instances, California allows the holder to send the property to the State Controller’s Office to facilitate the reunification process.

If you’re interested in seeing an example of a fraudulent letter, here’s an example with holder and “owner” information redacted received by a holder.

Questions? Contact California’s Fraud Unit at (916) 464 - 6259 or email Gillian Knight at gknight@sco.ca.gov.

 

Tags:  California  fraud  preliminary report  unclaimed property 

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UPPO amicus brief to the Supreme Court requests clear state standards

Posted By Administration, Tuesday, September 29, 2015

On Sept. 8, 2015, UPPO submitted an amicus curiae brief (a brief that offers an additional opinion or support to a party involved in the case), to the U.S. Supreme Court, supporting a petition for writ of certiorari (a request made to the U.S. Supreme Court to review a decision made by a lower court) by the plaintiffs in Taylor v. Yee.

 

UPPO’s amicus brief supports the plaintiffs’ claim that, “California’s unclaimed property law violates the Due Process Clause of the Fourteenth Amendment by failing to provide constitutionally adequate notice to owners of property to be escheated, and by failing to take adequate steps to locate and notify property owners before liquidating their property.”

 

The association lays out three arguments in its request to the court:

 

1.   The seizure and liquidation of securities and other property under California’s unclaimed property laws harms property owners. In the case of tax-deferred accounts, the escheat may result in tax penalties.

 

2.   State procedures for notifying owners of escheated property are inadequate and violate due process. Even when previous mail has been returned as undeliverable, California sends its notice to the same address without taking additional steps to find a better address. Taylor argues that California’s unclaimed property law should require California should search its other databases for owners—Department of Motor Vehicle records, for example—to find better addresses for the state-sent notice.

 

3.   State laws requiring the liquidation of securities violate the Fifth Amendment’s Takings Clause because they fail to provide compensation to property owners. The liquidation of securities deprives owners of the value of appreciation, dividends and interest. States are motivated to liquidate securities quickly to boost revenues and meet budget requirements.

 

Through its amicus curiae brief, UPPO asks the court to establish clear standards the states must follow to notify property owners before seizing and liquidating property, and to define just compensation to be paid to owners whose property is liquidated.

 

"UPPO's leadership made the decision to file this amicus brief because of the importance of the issues, not only for its members and holder community, but for owners. The advocacy agenda of UPPO focuses on ensuring fairness and balance, clarity and the preservation of holders and owners constitutional rights. Filing the brief supports that,” says, Toni Nuernberg, executive director, UPPO.    

 

The U.S. Supreme Court has given California until Oct. 8, 2015, to file a response.

 

More information

Visit UPPO’s advocacy page for additional information on other advocacy initiatives.

 

Tags:  amicus brief  California  reporting  Taylor v. Yee  unclaimed property 

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California creates centralized holder reimbursement mailbox

Posted By Administration, Tuesday, May 5, 2015

If you have questions about submitting a reimbursement claim to the California State Controller’s Office (SCO) you can now send it to a new email address, dedicated to answer questions about reimbursements. SCO made the switch to better serve the holder community, and states, in its spring 2015 newsletter that they’ll respond to inquiries within two business days.

 

Holders submit reimbursement claims when they remit property to an owner after that property has been delivered to the SCO. The process to reimburse hasn’t changed. The requirements the SCO lists in its Holder Handbook for holders to follow when submitting a reimbursement claim are:

 

Include a Holder’s Claim for Reimbursement (HCR-1) form. The instructions for completing the form are listed on page 2 of the form.

  • All HCR-1 forms must contain an original signature.
  • Handwritten or faxed forms are not acceptable.
  • All HCR-1 forms for $1,000.00 or greater must be notarized.
  • All reimbursement requests for securities must be notarized.
  • All requests must be accompanied with a “Letter of Authorization”. The letter must be on the claiming holder’s letterhead and contain the name of each individual authorized to claim on behalf of the holder; agent cannot authorize themselves.
  • A copy of the Holder Face Sheet, Form UFS-1 form (a copy of the property detail sheet showing the owner’s name and account) will help facilitate the processing of the claim.
  • All documents should be mailed to the following address: California State Controller’s Office Unclaimed Property Division, P.O. Box 942850, Sacramento, CA 94250-5873

Questions about the reimbursement process can be directed to California’s new reimbursement-specific email address CAHCR@sco.ca.gov.

Tags:  California  reimbursement  SCO  unclaimed property 

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