Arizona money being stolen by Delaware, lawsuit claims

Sierra Vista Herald ^ | Howard Fischer, Capitol Media Services

[SandRat]

PHOENIX — Delaware is stealing millions of dollars that belongs to Arizona and its residents, Attorney General Mark Brnovich is charging.

In a new lawsuit being filed Thursday at the U.S. Supreme Court, Brnovich and colleagues from other states contend Delaware is illegally telling MoneyGram Payment Systems to give it any funds not claimed by customers. MoneyGram, in the business of selling money orders and travelers' checks, is incorporated in that state.

But the attorneys general say federal law requires such funds to be given to the state where it was purchased.

The lawsuit says Delaware has been doing this for years. But it was not until 21 other states brought in an outside auditor did they find what MoneyGram, at the direction of Delaware, had been doing.

A spokeswoman for Brnovich said at last count Delaware, the home of many corporations because of its business friendly laws, had taken custody of more than $162 million belonging to other states, including Arizona. She had no immediate figure for just this state.

But Brnovich said just the principle is important.

That's because Arizona law requires the state to look for the rightful owners of any abandoned property.

There is no time limit on making a claim, with that person — or even heirs — able to recover it forever.

And what is never claimed is used to help pay for affordable housing in Arizona and even balance the state's books.

"This lawsuit is about preventing another state from stealing Arizona's unclaimed property,'' Brnovich said.

"We want to give Arizonans every opportunity to claim money that's rightfully theirs.''

And there's a lot of it: Sean Laux of the state Department of Revenue said his agency gets about $100 million a year in everything from negotiable instruments to actual property retrieved from safe deposit boxes. And that's after whatever bank or institution was holding the property has done what is required to find the owners.

In a prepared statement, Thomas Cook, the Delaware secretary of finance, said his state "disputes the allegations'' in this lawsuit as well as others that have been filed.

But Cook conceded, at least indirectly, that the legal questions around who is entitled to the unclaimed money need to be resolved.

He said Delaware itself already had asked the high court this past week to look at the issue and questioned why Texas and the other states in this case did not simply intervene in that earlier lawsuit. But Cook said Delaware "is hopeful that the Supreme Court will provide all states with guidance on how companies should handle this particular type of unclaimed property in the future.''

The case is being filed directly with the nation's high court which generally handles disputes between states.

Arizona, like most states, has laws dealing with what is considered "abandoned property.''

For example, if a traveler's check is not cashed with 15 years it is presumed abandoned. Money orders, by contrast, get that status after just three years.

There also are rules for stocks, certificates of deposit and even credits owed to a retail customer. And a safe deposit box is considered abandoned if the rent goes unpaid for three years.

But even in those cases, Arizona law requires the state to try to find the owners, though some property and cash ultimately goes unclaimed.

In general, the law is that the property is returned to the state of the owner's last known address appearing on company records. But if that cannot be ascertained, then the unclaimed property goes to the state of incorporation of the company that issued the financial instrument.

But Texas Attorney General Ken Paxton, who has taken the lead in this case, said Congress enacted specific laws dealing with unclaimed money orders, travelers' checks and similar items, requiring that unclaimed funds to go the state where the item was first purchased.

"That legislation ... was intended to prevent one state — where many corporations maintain their domicile ­­— from enjoying an inequitable windfall at the expense of the other 49 states where the purchasers of travelers' checks and money orders actually reside,'' the lawsuit states.

Laux said some efforts by the Department of Revenue to find owners are direct, like sending letters to the last known address of the presumed owner. And he said Arizona works with other states that have similar laws on abandoned property, uploading information to "missingmoney.com'' where individuals can input their names and see if the state has anything for them.

Last budget year the state managed to return about $43 million of what it took in, though Laux said the average return rate is only about 32 percent.

That's where the other half of the issue comes in.

Some of what's left over goes into the Housing Trust Fund which helps provide affordable housing. The state also provides $25 million a year to the Department of Revenue to underwrite its operations, with anything left over going into the general fund.

But Laux said the money is never lost: The owner or that person's heirs can make a claim at any time.

"They're entitled to the property or the value of the property forever,'' he said, even if no one shows up for decades.

That does not mean the state has a locker full of odds and ends from safe deposit boxes or a drawer full of stock certificates.

Laux said personal property is auctioned off several times a year, with the value recorded on permanent state records. And securities are sold off at market value, with the amount generated kept in cash.

[Lurkinanloomin]

Fairly well written and informative article, don’t see that much anymore.

[SandRat]

Thah’s just the way Howard is.

[Auntie Mame]

I agree, well written. Just for fun I went to Delaware’s unclaimed property website and interestingly, the listings are so vague that few would be able to figure out if they are actually the person that has unclaimed property unless they have a name that is one-of-a-kind (I found a cousin on there but no one in this country has her name). Also, there is no indication, like is done in California, what the amount of the individual unclaimed property is. So basically, they’ve made themselves a tidy little slush fund.