State Unclaimed Property Laws Under Scrutiny The state of California holds unclaimed property worth more than $5 billion. Now, a judge has put a temporary stop to the practice, saying that the state must do a better job of locating the original owners of these assets.

State Unclaimed Property Laws Under Scrutiny

  • Download
  • <iframe src="https://www.npr.org/player/embed/12379040/12424881" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

Around the country, states are holding nearly $33 billion in unclaimed property. Every state has a law that allows it to take control of everything from stocks to escrow accounts to the contents of safety deposit boxes if the owner cannot be found. In recent years, many states have become more aggressive about locating those forgotten assets and less aggressive about trying to find the rightful owners. And in California, that's got some property owner so upset they are suing.

Gloria Hillard reports.

GLORIA HILLARD: You might wonder how someone could lose more than $25,000 in stock. Well, 71-year-old Richard Valdes says that's what happened.

Mr. RICHARD VALDES: I forgot about them. Now, that seems dumb to forget about stuff like that.

HILLARD: Stock from a business sale in 1976 was set aside in an escrow account, he says, and forgotten for 20 years. But by then, it was too late. California had seized the stock and sold it under the unclaimed property law. Valdes is suing, claiming the state never tried to find him, which, he says, would have been easy.

Mr. VALDES: Because I've lived down here for 50 years - right here. It's just a darn shame that the state does stuff like that.

Mr. BILL PALMER (Lawyer): It's no different than stealing.

HILLARD: Sacramento attorney Bill Palmer represents Valdes and at least a dozen other plaintiffs in lawsuits against the state. He claims, in recent years, the state controller's office turned what was essentially a lost and found for unclaimed property into a for-profit business, which provided close to $400 million a year for the cash-strapped state.

Mr. PALMER: People who are hard up for money, they go to their savings account and discover for the first time that it was looted by the state of California.

HILLARD: In the 1980s, the state controller shut down the unit that actively searched for property owners, and over the years, lawmakers whittled down the time limits for when assets would be considered abandoned. Under current law, lost or forgotten property can be seized after just three years of inactivity or dormancy.

But California is not alone in this practice. Debbie Zumoff is with the Keane Organization, a firm that informs corporations on their unclaimed property responsibilities. She says, over the years, there has been a marked trend across the country regarding unclaimed property.

Ms. DEBBIE ZUMOFF (Chief Compliance Officer, The Keane Organization): What we're seeing is a collection of revenue in the guise of asset safeguarding.

HILLARD: Nationwide, states are safeguarding nearly $33 billion in private assets. California is holding $5.1 billion from securities to bank and brokerage accounts, even safe deposit boxes. And where you can get just a glimpse of some of that real property is here.

(Soundbite of door opening)

HILLARD: The Bureau of Unclaimed Property in Sacramento. Garin Casaleggio, a spokesman for the state controller's office, says the number one item found is cash, along with what you'd expect to find - family photos, jewelry, old bonds.

Mr. GARIN CASALEGGIO (Spokesman, State Controller's office): Looks like children's first pair of shoes, an old leather-bound version of the "Scarlet Letter," and a photo of Whoopi Goldberg.

HILLARD: In another room, stacked on every available shelf are four to five hundred large storage boxes. At long tables, state employees are going through those boxes, logging the contents.

Mr. CASALEGGIO: This is specifically from people's safe deposit boxes that have been sent over to the state for safekeeping.

HILLARD: A federal judge has slapped an injunction on the controller's office to make sure they remain in safekeeping. The judge found the state's practice of notifying property owners through generic newspaper ads to be unconstitutional and has halted the further seizing or selling of private assets until the state satisfies the original intent of the law: to reunite owners with their assets. The injunction could lead the state's budget short and has the new state controller scrambling to fix it.

John Chiang says he is supporting proposed legislation that would ensure adequate notice and protection for citizens.

Mr. JOHN CHIANG (State Controller, California): I want to get that money back into people's hands.

HILLARD: But State Senator Tom McClintock, a long-time critic of the state controller's office, says the proposed reforms are fig leaves and that the state is relying on that money for next year's budget. McClintock is also calling for legislative hearings and audit of the outside contractors or what he calls bounty hunters hired by the state who are paid handsome commissions on located assets.

State Senator TOM McCLINTOCK (Republican, California): They've spent hundreds of millions of dollars locating property to seize and only several thousands dollars to locate rightful owners.

HILLARD: Carla Ruff is one of a number of people who agree reforms are needed. Last year, when she visited her safe deposit box, she learned the contents have been turned over to the state. She says she wouldn't have been hard to find. She was a current customer and her deed of trust was in the box, along with her grandmother's jewelry appraised at over $80,000.

Ms. CARLA RUFF: I was absolutely outraged. One thinks of a safety deposit box as being the safest possible place.

HILLARD: She says the state sold off the jewelry presumably at auction. She received a check, which she has encashed, for seventeen hundred and seventy-one dollars.

For NPR News, I'm Gloria Hillard.

Copyright © 2007 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.