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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 Survey Examines State Unclaimed Property Return Rates

Posted By Administration, Thursday, November 7, 2019

State unclaimed property officials often promote their goal of reuniting citizens with their property. They use a variety of tactics to educate the public about unclaimed property and encourage people to search their unclaimed property databases. They perform their work under a patchwork of laws and policies that vary by state.

 

The Unclaimed Property Professional Organization Claimants’ Representative Committee is examining how these laws and other factors affect unclaimed property return rates. Its objective is to apply a data-driven approach to identify, organize and share existing laws and policies that maximize reunification while preserving balanced consumer protection.

 

The committee’s first step was establishing individual state return rates. Using data gathered through a Freedom of Information Act request, the committee reviewed the total dollar amount of unclaimed property received and paid annually for fiscal years 2013-17 from all states. The following return rate results are organized into four descending groups of 12 states each by percentage returned. The states within each group are listed alphabetically and do not reflect any return rate order within the group.

 

Three states – Indiana, Nebraska and Wisconsin – are not included in the following results. Their committee is reviewing the methodology used by the states to determine their results, which varied significantly from the other states, making them subject to question. 

 

Group #1

Average Return Rate: 48.25%

Return Rate Range: 58.75% – 43.14%

  • Connecticut
  • Florida
  • Illinois
  • Iowa
  • Maine
  • Mississippi
  • Nevada
  • New York
  • Rhode Island
  • Utah
  • Vermont
  • Washington

 

Group #2

Average Return Rate: 40.12%

Return Rate Range: 42.56% – 38.83%

  • Alaska
  • California
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • Missouri
  • Montana
  • Oregon 
  • South Carolina
  • Tennessee

 

Group #3

Average Return Rate: 36.02%

Return Rate Range: 38.74% – 33.14%

  • Arizona
  • Arkansas
  • Hawaii
  • Idaho
  • Louisiana
  • Maryland
  • New Jersey
  • Oklahoma
  • Pennsylvania
  • Texas
  • West Virginia
  • Wyoming

 

Group #4

Average Return Rate: 19.44%

Return Rate Range: 31.18% – 8.59%

  • Alabama
  • Colorado
  • Delaware
  • District of Columbia
  • Georgia
  • New Hampshire
  • New Mexico
  • North Carolina
  • North Dakota
  • Ohio
  • South Dakota
  • Virginia

 

The committee is now analyzing state statutes and policies governing claims, private sector service provider restrictions, and unclaimed property account information restrictions to compare return rates with legislative and policy frameworks. This information will be the subject of a future committee report. 

 

Tags:  return rates  unclaimed property 

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Whistleblower Trend Raises Concerns for Unclaimed Property Holders

Posted By Administration, Thursday, October 10, 2019
Updated: Saturday, October 5, 2019

Government politics aren’t the only place whistleblowers are making news these days. Several recent whistleblower lawsuits aimed at unclaimed property practices signal a concerning trend for holders. 

 

Typically, whistleblower, or qui tam, cases under the False Claims Act come about when a company’s employee or former employee (referred to as the “relator”) alleges the company defrauded the government by intentionally paying the government less than what is owed. Allegations usually involve falsifying documents to mislead the government into thinking less money is due. 

 

“Unclaimed property cases don’t fit into the usual False Claims Act mold,” said Ethan Millar, partner with Alson & Bird LLP. “False claims statutes were not intended to apply to regulatory disputes between a state and a holder about when states’ unclaimed property laws apply. They were designed to be quasi-criminal anti-fraud statutes, which is why they impose severe penalties, including treble damages and attorneys’ fees.”

 

Unfortunately, recent qui tam cases have been based on mere regulatory disputes. Given the direction such cases have taken, it’s possible that any noncompliance with unclaimed property statutes could result in accusations of False Claims Act violations. 

 

Decided last September, The State of Delaware ex. rel. William Sean French v. Overstock.com Inc. represents a turning point for False Claims Act cases related to unclaimed property compliance. At issue in the lawsuit was Overstock’s relationship with CardFact (later acquired by Card Compliant LLC), a third-party company used to issue gift cards and assume certain gift card responsibilities. 

 

The case came about when a former CardFact employee filed a qui tam lawsuit, alleging that CardFact and dozens of its retail clients (including Overstock) had violated the Delaware False Claims and Reporting Act by failing to escheat unredeemed gift cards to the State of Delaware. 

 

Among the various allegations, the plaintiffs claimed that the contracts between CardFact and its clients were shams and that the retailers rather than CardFact were the true issuers of the cards, and were required to report them to Delaware, as their states of incorporation. All of the defendants in the case other than Overstock were dismissed or settled. 

 

“I don’t think anybody in the holder community believes that Overstock acted with knowledge or reckless disregard for the law,” Millar said. “Overstock’s actions were perfectly reasonable and consistent with what dozens of other retailers were doing in terms of structuring their operations to reduce unclaimed property risks. These structures were not hidden from Delaware. They were openly discussed at conferences, in Delaware audits and in Delaware voluntary disclosures, and nobody ever said you can’t do this kind of thing or have to do it a particular way. To the contrary, Delaware approved very similar structures for well over a decade prior to this case.” 

 

However, a jury decided the third-party “cardco” structure in this case was improper and that Overstock knowingly or recklessly disregarded the law and should have reported its unredeemed gift card balance, less related profits, to Delaware. Along with the decision came a hefty judgment for $7.2 million, including civil penalties, treble damages and other costs. In addition, the state is entitled to attorneys’ fees, though the amount of such fees is still in dispute. Overstock has appealed the decision.

 

This decision leaves the unclaimed property community wondering, if a company can be held liable under the False Claims Act under those circumstances, what other circumstances could be used to hold businesses liable.

 

Relators are motivated by the prospects of a huge financial windfall of 15-25% of any judgment or settlement resulting from their lawsuits. Unfortunately, their self-interests are advancing aggressive enforcement positions regarding unclaimed property laws that not even state administrators are promoting.

 

In another recent case, New York ex. rel. Raw Data Analytics LLC v. JPMorgan Chase & Co., the relator alleges that JPMorgan is liable under New York’s False Claims Act for failing to self-assess interest on late reported unclaimed property. Although the New York Office of Unclaimed Funds does not require holders to self-assess interest, the court ruled that, under New York’s Abandoned Property Law, such self-assessment is mandatory. JPMorgan takes the position that nobody in the industry self-assesses interest and that the states don’t expect or ask holders to do so.

 

“We’re now seeing these sorts of cases where relators are making novel legal arguments about what is required under state unclaimed property laws, and then trying to use this alleged violation of the escheat statutes as the basis for False Claims Act liability,” Millar said. “False Claims Act complaints are no longer confined to scenarios when a company is committing what looks like fraud.”

 

Relief for the unclaimed property community from False Claims Act lawsuits that exceed the law’s intent requires a court to address one big question: Should False Claims Act statutes even apply to unclaimed property? The False Claims Act is intended to apply when money is owed to the government. However, unclaimed property is owed to the property owner. The government acts merely as a custodian of the property. 

 

“I suspect any major False Claims Act case in the future will raise this issue,” Millar said. “There is strong authority in the False Claims Act that a custodial interest alone is not sufficient to trigger the False Claims Act. After all, the False Claims Act statutes were intended to apply to government funds, not to money owed to individuals.”

 

Until such a decision, unclaimed property holders can take steps to protect themselves. First, they should ensure their unclaimed property compliance policies, procedures and practices are current, well documented and thoroughly followed. Next, address “gray areas” where holders and states have differing perspectives. 

 

“There will always be gray areas because no unclaimed property law directly deals with every specific situation,” Millar said. “These gray areas may be exploited by relators. However, holders can protect themselves by obtaining legal opinions to support their positions. Even if a court later disagrees with the holder’s position, the fact that the holder reasonably relied on legal counsel can demonstrate that the holder did not act with the knowledge or recklessness for False Claims Act liability.”

 

Finally, respond to issues raised by employees. Companies should have policies and procedures in place for addressing employee complaints. Don’t retaliate against employees who raise potential issues, and always investigate credible complaints. Giving employees a meaningful complaint process and remediating problems early may reduce the likelihood of issues rising to the level of a full-blown qui tam lawsuit. 

Tags:  JPMorgan  litigation  Overstock  qui tam  trends  unclaimed property  whistleblower 

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Unclaimed Property News Roundup

Posted By Administration, Thursday, September 19, 2019

Unclaimed property often makes news headlines beyond the frequent reports of states trying to return money to their citizens. Following is a recap of some recent stories getting news coverage from local and national media outlets. 

 

Unclaimed gift cards become a gift to state budgets 

On Aug. 27, 2019, The Atlantic published an article discussing states’ use of unclaimed property – with a focus on gift cards – to strengthen their budgets. The article discusses Delaware’s unclaimed property practices, the Overstock.com case and the debate over states spending unclaimed funds. 

 

Lost items resurface at unclaimed property auction 

On Aug. 28, 2019, Orlando Sentinel reported on the strange tale of an elementary school teacher who discovered items from her safe deposit box, which her bank lost years earlier, were part of Florida’s unclaimed property auction.  

 

Consumer reporters shine the light on unclaimed property claim challenges 

On Aug. 28, 2019, ABC 7 News in San Francisco reported on a citizen’s difficulties claiming funds from an unclaimed cashier’s check after receiving notification from California’s Unclaimed Property Division. After claim denials, the state promptly returned the man’s funds when the television station’s consumer reporters sought answers. 

 

Famous people have unclaimed property too

A Sept. 4, 2019, Outline article discusses the treasure trove of unclaimed property waiting to be claimed by celebrities in California. Searching the state’s database, the website discovered nearly $100,000 available to more than 200 celebrities, escheated by an out-of-business board game manufacturer.

 

Cryptocurrency and unclaimed property 

A Sept. 11, 2019, Accounting Today article discussed the need for companies to consider the effects of cryptocurrency’s rising popularity on their practices, including unclaimed property compliance. 

Tags:  cryptocurrency  gift cards  safe deposit boxes  unclaimed property 

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Pennsylvania Reaffirms Reporting Standards for Retirement Accounts

Posted By Administration, Wednesday, September 11, 2019
Updated: Wednesday, September 11, 2019

Brian Munley, Pennsylvania's director of the bureau of unclaimed property, recently issued a notification and reminder of the state’s Policy Guidance – Reporting Standards for Fiduciary Accounts. The notice reaffirms that Pennsylvania's guidance from September 2016 is still in effect and should be followed until further notice from the state. 

 

Following is Pennsylvania’s September 2019 notification:

 

In September 2016, in response to amendments made to the Commonwealth’s Disposition of Abandoned and Unclaimed Property Law, Treasury issued a Policy Guidance with a particular emphasis designed to ensure that IRAs and other types of retirement account owners would not be subject to negative tax treatment as a consequence of an escheatment of retirement-related assets to the Commonwealth. This Guidance protects an account owner under the age of 59 ½ by preventing the reporting/distribution of certain re-tirement accounts which my otherwise be subjected to the Internal Revenue Code’s 10-percent additional tax for early distributions. IRC §72(t)(2)(A)(i).

 

The following is a restatement of the Policy Guidance, which remains in full force and effect: 

Treasury will neither demand nor accept any retirement account that is presumed abandoned and unclaimed, except as follows:

  1. An individual retirement account (including a retirement plan for self-employed individuals) of which the beneficiary cannot be located for a period of three (3) years following the death of the owner and that is not subject to a mandatory distribution requirement; or
  2. An individual retirement account (including a retirement plan for self-employed individuals) of which the owner has attained seventy and one-half years of age and is not subject to a mandatory distribution requirement.

Accordingly, until further notice, retirement accounts are to be reported only if either of the above requirements are satisfied. It is Treasury’s objective to prevent the reporting of property that is not truly abandoned or unclaimed. In so doing, Treasury notes its authority to exercise its discretion to refuse the acceptance of certain types of unclaimed property. §72 P.S. §1301.17.

 

Questions pertaining to this notification may be directed via email to bmunley@patreasury.gov.

Tags:  Pennsylvania  retirement accounts  unclaimed property 

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City of Chicago Faces Accusations of Hiding Unclaimed Property

Posted By Administration, Wednesday, September 4, 2019

The city of Chicago is accused of failing to escheat more than 22,000 uncashed city checks totaling more than $11 million to the state of Illinois, according to a recent Chicago Sun-Times article. Class action attorney Clint Krislov discovered the checks as part of the discovery process for a longtime dispute with the city over retired city employees’ benefits.

 

On August 19, 2019, Krislov Law filed a complaint in the Circuit Court of Cook County against the City of Chicago for failing to comply with the Illinois Uniform Disposition of Unclaimed Property Act and the Revised Uniform Unclaimed Property Act.

 

The lawsuit accuses the city of using the funds as an indefinite “cash float” and failing to give the public an opportunity to find and claim the funds. 

 

According to the complaint, “[Freedom of Information Act] requests to a number of other Illinois municipalities show that the City of Chicago’s intentional omission of reporting these amounts is a deviation from the norm, rather than some justifiable exercise of the City’s home rule powers.”

 

Krislov reportedly told the Sun-Times that state attorney general was aware of the city’s unreported property and, thus, shared in the responsibility for not making it available for the owners to claim. 

 

Although he didn’t comment on the specific accusations raised by the lawsuit, representative for the Chicago Law Department Bill McCaffrey told the Sun-Timesthat the city has enacted its own unclaimed ordinances and procedures, which are not preempted by the Illinois Revised Uniform Unclaimed Property Act.

 

The lawsuit complaint awaits a response from the city of Chicago. 

 

 

Tags:  Chicago  Illinois  municipalities  unclaimed property 

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