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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: Unclaimed Property Misperceptions​

Posted By Administration, Thursday, February 14, 2019

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: What is the most noteworthy or most frequent misperception you’ve heard about unclaimed property? 

 

“The most noteworthy misperception I hear is that MissingMoney.com and states’ websites are the only places to check for claimable unclaimed property.”—Paul Janisko, CEO, CoreUCP

 

 

“Most people think of unclaimed property as lost stuff, like umbrellas. They do not understand how that could pertain to my company.”—Amy Soler, administrative assistant, tax department, Solvay Business Services

 

 

“Sometimes it is challenging to convince management that the due diligence and other unclaimed property reporting requirements must be followed. Once I took a boss to an unclaimed property presentation provided by the state in order to show that the company needed to follow the unclaimed property rules. Many people that I speak with are still unaware that unclaimed property reporting rules exist. I have stated many times to colleagues who work at other companies, ‘No, you can’t write off old, uncashed checks.’”—Ruby Spiller, senior GL accountant, Infineon Technologies Americas Corp.

 

 

“A misperception on the work end of it would be that it’s easy. People within my company that I have talked to don’t realize how much work actually has to go into it. They just assume I throw a report together and send it off, when there is much more to it.”—Amy Lagunero, accounts payable specialist, Mortgage Guaranty Insurance Corporation

 

 

“The two most common misperceptions I’ve heard are: 1. As a holder, you only have to file in the states in which you operate; and 2. There is a uniform law that most states adopt. The reality is quite the opposite.”—Missy Key, vp – accounting, America First Credit Union

 

 

“1. Owners don’t realize how complicated the process is for getting escheated funds back from the state. Even when all of the required documentation is provided to the state by the owner, it can take years for the owners to get their funds back, if they are able to get them back at all.

 

"2. You don’t have to claim unclaimed property on taxes or as income.

 

"3. Owners don’t realize that their funds are sent to the state after the dormancy period. They often think that we just hold the money forever until they ask for it.”—Courtney Papinchak, accounting manager, Anadarko Petroleum Corporation

 

 

“The most frequent misperception I find for holders is the discounting of the gravity of their compliance responsibilities, recognition of its application and the degree of their potential exposure.

 

“The most frequent misperception I find for owners is that when searching for their properties they need to utilize searches for all name combinations, including aliases, in as many jurisdictions as possible, especially those individuals whose surname may also be a first name.”—Mark Watters, owner, Watters Unclaimed Property Consulting LLC

 

 

“They don’t think it affects them so they don’t care about unclaimed property.”—Susan Maul, senior manager, indirect tax, Arris International PLC

 

 

“The misperception I have often heard is that if someone is owed money from a company they would somehow be found. At this point, I gently explain that most often if the payee has changed address several times, or their last name has changed or whatever other circumstance applies, it becomes very difficult to track an individual – especially if no unique identifier is available, like a SSN or date of birth. I have personally experienced this many times as an escheat administrator since we do not collect SSNs or DOBs from our clients. 

 

“Another misperception I have heard of is if a due diligence letter is not returned by the U.S. Postal Service that means that the owner has received it and funds should not be escheated. Again, I gently explain that just because a due diligence letter was not returned undeliverable, we cannot assume that the owner received it. Since no response has been forthcoming from the owner, it is safe to assume that funds should be escheated.”—Antoinette Di Dato, accounting – compliance, GreenbergTraurig, P.A.

 

 

“One of the biggest noteworthy things in working for a TPA is that I rely heavily on our adjusters to contact claimants and providers when a check becomes stale dated. I am frequently asked to void checks because a claimant/provider is not able to be contacted or due to not having a current address. This is frustrating from my end because I know I am sending out due diligence letters to the wrong address, which means I’m not giving the state ‘good’ information when filing.”—Eric Nesbitt, accounting supervisor, Cannon Cochran Management Services, Inc.

 

 

“I guess the most frequent misconception is that once funds are moved to an unclaimed liability account, the business’s normal policy and procedures are eliminated. For instance, if the funds are related to a death claim, the misconception both internally and externally is that the death claim paperwork is no longer required in order to pay the funds out to the owner.”—Tony McDowell, senior accountant, American Equity Investment Life Insurance Company

 

 

“Common misperceptions in the oil and gas industry are that the states do not want every penny – for instance, only $50 and above; and that the states keep the money after a certain number of years of being unclaimed.”—Joni Byrd, senior advisor – land administration, EnerVest Ltd.

 

 

“The most frequent misperception I’ve heard about unclaimed property is individuals accept full responsibility for the recovery of unclaimed funds. If the statement were true, there wouldn’t be billions of dollars sitting on general ledgers of many companies. I believe some people don’t know the funds are there. Some think the funds are so small they aren’t worth the time and effort. Some don’t believe unclaimed property has anything of value. They believe it is a scam. But, I believe each fund-matters – each one has worth – each has a right to be claimed, and when added together the sum is astonishing.”—Monica Johnson, escheatment/unclaimed property manager, United Parcel Service

 

 

Now it’s your turn. What do you think are the most important personality traits for an unclaimed property professional? Add a comment to this post to share your response.

 

Tags:  unclaimed property  UPPO Asks 

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HIPAA and Unclaimed Property

Posted By Administration, Thursday, December 6, 2018

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is intended, in part, to protect patients’ privacy. The law establishes standards for handling and securing potentially sensitive protected health information (PHI).

 

HIPAA is not typically associated with unclaimed property. However, for property holders in the health care field or that work with the health care field, it’s important to understand HIPAA implications. Considerations related to HIPAA most often come into play when dealing with an audit or a voluntary disclosure agreement. Auditors or VDA administrators may ask for information that, when shared, could violate HIPAA provisions.

 

HIPAA precludes covered entities, such as health plans, insurers and providers from disclosing PHI to third parties, with a few narrow exceptions. According to the Department of Health and Human Services, PHI includes demographic information relating to:

  • An individual’s past, present or future physical or mental health or condition.
  • The provision of health care to the individual.
  • Payment for health care that may identify the individual.

 

PHI includes common identifiers, such as name, address, birth date and Social Security number, when they can be associated with health information. It can also include identifiers that could be used to trace an account to a specific medical issue, such as internal account numbers.

 

“There is a general prohibition on disclosure of records dealing with mental health, substance abuse treatment, genetic testing and HIV/AIDS under HIPAA and various federal and state laws, absent patient consent,” said Scott Heyman, partner with Sidley Austin LLP. “Those laws are very strict and without exception. Even if exceptions are available for providing other PHI to third parties, they are not available for those conditions.”

 

HIPAA violations are subject to civil and criminal penalties, so great care needs to be taken to ensure compliance.

 

Three exceptions to PHI disclosure without patient consent exist under HIPAA:

  • Disclosure to public health authorities.
  • Disclosure in health oversight activities.
  • Disclosure for law enforcement purposes.

 

State treasurers and controllers conducting unclaimed property audits are not public health authorities and are not engaged in health oversight activities, so the first two exceptions do not apply. 

 

The “disclosure for law enforcement purposes” exception is broad enough to cover unclaimed property audits. In order to disclose information under the law enforcement exception: 

  • PHI sought must be “relevant and necessary to a legitimate law enforcement inquiry.”
  • The request must be ”specific and limited in scope to the extent reasonably practicable in light of the purpose for which the information is sought.” 
  • “Deidentified information could not be reasonably be used.” 

 

Disclosure is permitted only to law enforcement officials, defined as “an officer or employee” of an eligible agency. Thus, PHI may not be disclosed to private government contractors without patient consent. In contrast, the public health and health oversight exceptions expressly permit disclosure of information to government contractors. 

 

PHI should be retracted from items provided to auditors. 

 

“If they insist that they need PHI for audit purposes, providing the information directly to the state and letting the state decide what to do with it may be a reasonable response,” Heyman said.

 

Redaction can be very time-consuming and one of the more burdensome aspects of an unclaimed property audit in the health care industry. 

 

“Often the information at issue includes things like explanations of benefits, where you’re proving out voids and reissuances,” said Heyman. “Those tend to be copies of paper documents. It means reading those documents and crossing out PHI with a black marker. It’s an intensively manual process, and knowing which boxes contain PHI and which don’t, and blacking them out appropriately, is essential.”  

 

Holders should refer to information from HHS for guidance on de-identifying PHI.

 

Unclaimed property compliance and audits are rarely simple. For holders in the health care space, HIPAA adds yet another compliance layer. 

 

The 2019 UPPO Annual Conference, March 24-27 in New Orleans, will include industry breakouts and an industry focus session for holders in the health care industry to discuss audit trends and compliance issues affecting them. Learn more and register today.

 

 

Tags:  audits  health care  HIPAA  unclaimed property 

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Unclaimed Property Fraud Hits LinkedIn

Posted By Administration, Thursday, November 1, 2018

Scams involving unclaimed property are nothing new, but the latest attempt at defrauding property owners uses a new tactic – a bogus LinkedIn profile designed to look as though it belongs to a state treasurer.

 

On Oct. 23, 2018, Nebraska State Treasurer Don Stenberg issued a warning that a fake LinkedIn account that appeared to be his had been used to contact unsuspecting recipients about unclaimed property. 

 

“I want Nebraskans to know that this impersonator has been active on LinkedIn and through email, and I am urging Nebraskans to contact my office immediately if they have any concerns or suspicions about notifications they have received claiming to be from the Nebraska State Treasurer’s Office,” Stenberg said.

 

The LinkedIn profile used the name “Don Stanberg” – one letter off from the treasuer’s actual name – and the title “Executive Director at National Association of Unclaimed Property (NAUP) – one letter off from the treasurer’s former position as president of the National Association of Unclaimed Property Administrators (NAUPA). 

 

The biography on the fake account profile was identical to Stenberg’s biography on the treasurer’s website, using the correct spelling of his name and his professional background.

 

The sender’s email address used in that communication was doncop960@gmail.com. Email messages were signed “Hon. Don Stenberg” and were identified as the treasurer’s private email address. All legitimate Nebraska Treasurer’s Office email accounts come from the nebraska.gov domain and end with @nebraska.gov. 

 

Despite the effort put into developing a somewhat convincing LinkedIn profile, the email text should be a tipoff to most recipients that it’s a scam. A Houston resident who received one of the emails was informed he was an heir to $12 million that a deceased client had deposited in a U.S. “Finance House in State of Nevada” that was “now lying DORMANT and UNCLAIMED.” The email was long and awkwardly worded, with poor grammar and confusing sentences.

 

Stenberg encouraged anyone contacted by the impersonator to contact his office with details.

 

Scams directed at individual property owners have sprung up often enough to warrant consumer warnings from several states in recent years. This form of fraud usually entails someone offering to help locate property for a fee or, like the Nebraska incident, promising a substantial (and completely fictional) windfall. Eager consumers either pay for bogus services or provide personal information that gives scammers access to bank accounts. 

 

 

Tags:  fraud  Nebraska  scam  unclaimed property 

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Jury Rules Against Overstock in Qui Tam Lawsuit

Posted By Administration, Thursday, October 25, 2018

On Sept. 20, 2018, a Delaware Superior Court jury ruled in The State of Delaware ex. rel. William Sean French v. Overstock.com Inc. that Overstock.com violated the state’s False Claims and Reporting Act by failing to escheat unredeemed gift card balances as unclaimed property. 

 

At issue in the lawsuit was Overstock’s relationship with Card Compliant LLC (previously CardFact), a third-party Ohio-based company used to issue gift cards and assume certain gift card responsibilities. The case came about when a former Card Compliant employee filed a qui tam(whistleblower) lawsuit, alleging fraud against the government. Dozens of other defendants were dismissed from the lawsuit or settled, leaving Overstock as the only defendant.  

 

Among the various allegations, the plaintiffs claim that some defendants didn’t account for the transfer of liability in the manner its contracts specified. According to the state, the liability wasn’t truly transferred and, thus, defendants had the obligation to remit unclaimed property to Delaware but didn’t do so.

 

“It’s unusual in this line of business to have a jury verdict,” said Diann Smith, counsel with McDermott Will & Emery LLP. “Usually we get an opinion from the judge that will provide the facts and explain how the law applies to those facts, but that’s not the case with a jury verdict. We don’t really know why they came to this conclusion, leaving some mystery about what it means for other holders.”

 

Although the decision against Overstock has no precedential value, it certainly could have a ripple effect, encouraging Delaware to pursue similar actions against other retailers who use the giftco structure to shift unclaimed property liability. 

 

“Given this verdict, one would expect that Delaware will continue to take the position that the CardFact structure, as least in its current form, doesn’t work,” said Ethan Millar, partner with Alston & Bird LLP. “Although jury verdicts have no precedential value, it is also possible Delaware may use the verdict as an excuse to become more aggressive about challenging other types of gift card structures.”

 

This decision should encourage other companies with third-party giftco arrangements to review their practices to ensure the structures have substance and avoid the issues alleged by the whistleblower and Delaware. 

 

“Holders should consider carefully not just what was at issue in this case but also how it was brought – as a qui tam action, “Smith said. “They should think about what their compliance positions are and whether they are at risk for this type of action. The Delaware decision could raise the profile for people who are inclined to bring this type of action, and you want to avoid being a target.” 

 

Because whistleblowers receive a portion of the settlement/recovery for actions they bring, the incentive to report a former employer, for example, is high. A lawsuit that results in a multi-million dollar decision or settlement can provide a life-changing windfall for the whistleblower. 

 

One complaint that Delaware had in this case was that companies didn’t reach out to the state to ask whether the structure was valid. That raises the question whether companies with ambiguous issues related to their escheat practices, such as giftcos, should consult with the states. 

 

“In the Overstock case, Delaware argued that Overstock should have asked the state for guidance regarding the structure.  Technically, of course, there is no requirement to do so,” Millar said. “Consulting with counsel should be sufficient. Nonetheless, it would be helpful to understand what Delaware believes is necessary for a gift card structure to be effective. Accordingly, there could be something to gain from dialogue with the states on this and other issues.”

 

Even if the state’s response doesn’t affirm a specific practice, documenting the interaction and demonstrating that the state’s response wasn’t backed by a compelling argument or specific reasoning could prove useful if a dispute arises later. 

 

If Overstock appeals or if this decision leads to further action by Delaware, UPPO will continue to monitor and report on any noteworthy developments.  

Tags:  card compliant  Delaware  litigation  overstock  qui tam  unclaimed property 

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Building a Strong P&P Foundation

Posted By Administration, Thursday, September 13, 2018
Updated: Wednesday, September 12, 2018

Unclaimed property policies and procedures define a company’s goals and actions in pursuit of its goals to protect its interests. They are intended to strengthen compliance with the reporting requirements, and maintain an effective and efficient method to process, report and remit unclaimed property. 

 

What are the basic building blocks needed to document the reporting function and all of its responsibilities?

 

Understand reporting responsibilities for your company. Rules and regulations vary significantly by jurisdiction and industries. Despite this multitude of rules, look for opportunities to simplify. For many companies, the majority of unclaimed property exposure reside in a handful of states. If that’s the case, they may be able to base their procedures around what those states require. Staying on top of the legal requirements in the states where the majority of business occurs is typically the most effective use of limited resources. 

 

More conservative companies may put practices into place that ensure blanket compliance with the most stringent states’ requirements even if it means going far beyond the requirements in other states. 

 

Identify all potential sources of unclaimed property. Because states consider so many different types of property as reportable, it’s important to leave no stone unturned when outlining company policies and procedures. 

 

Review types of accounts and activities within the general ledger. Identify accounting activities for amounts reversed to income or expense, write-offs, voided checks and clean-up reversals. Evaluate promotional programs and contractual terms, loyalty programs, rebates and incentives programs, invoicing and settlement practices. Determine whether owner names and addresses are available.

 

Document not only what is considered unclaimed property in your company, but also other areas that have been reviewed and determined to not require reporting. Doing so helps ensure consistent application of policies and procedures. 

 

Build a team. Resources dedicated to unclaimed property may be scarce, so begin with what you have and build on it. You may not have buy-in from all the necessary people immediately, but as they become more familiar with what unclaimed property is, why compliance matters and how their role in compliance is important to the company’s goals, buy-in will increase. 

 

Involve all entities, divisions and departments. Define and assign responsibilities. For each area, establish department procedures, including:

  • Identifying unclaimed property. 
  • Researching.
  • Setting materiality limits and time frames. 
  • Detecting errors or irregularities. 
  • Resolving with the owner. 
  • Retaining adequate supporting documentation. 

Address how mergers and acquisitions will impact annual reporting. When becoming aware that a merger or acquisition has occurred, the holder must analyze the specific terms of the agreement to know what’s being purchased and what’s being retained – and whether there’s a provision addressing unclaimed property. Addressing M&A activity in unclaimed property procedures can help avoid confusion when such a transaction is under consideration or has recently occurred. 

   

Create an audit-ready one-stop shop. Actively following policies and procedures will make things much easier if auditors or other stakeholders require documentation of unclaimed property decisions. Recommended steps include: 

  • Create a designated unclaimed property liability account. 
  • Capture requisite details needed for reporting. Analyze data accessibility and evaluate the cost-benefit of automation.
  • Reconcile to a subledger database.
  • Establish record retention provisions. 
  • Safeguard unclaimed property, including data security controls, segregation of duties and internal controls and oversight. 

Establishing policies and procedures is merely the beginning of their lifespan. Unless they are followed, maintained and updated, guidelines and documentation serve little purpose. Make sure to include provisions for regularly reviewing and updating policies and procedures, and communicating changes to team members. 

 

Tags:  policies  procedures  Unclaimed Property 

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