I continue to be amazed at the amount of leakage in America’s corporate finances. By leakage, I mean money that goes unclaimed by corporations that is eventually escheated to state unclaimed property agencies. Where do these unclaimed assets come from? Mostly from checks gone astray in the mail or otherwise. Sometimes they are balances left over when bank accounts are closed and utility company deposits which are not collected. Sounds like small potatoes. However, I have seen numerous cases where those small potatoes add up to more than $1 million in lost assets for one company. I was recently retained by a major American company to recover unclaimed property, including almost $200,000 from one state alone.
Businesses should understand that state unclaimed property agencies are not going to notify them of the unclaimed assets held by the state. Since the states deposit most unclaimed money in a general revenue fund, there is a disincentive for the states to seek out unclaimed property owners; notwithstanding protestations to the contrary. For instance, California, years ago, had a department within its controller’s office charged with locating and notifying owners of unclaimed property received by the state. No more. Now, California makes it difficult for corporations to find and recover unclaimed assets held by the state.
California isn’t alone. In a case in New Jersey several years ago, brought by a corporation attempting to get information about unclaimed assets held by the State, the judged asked the State’s lawyer, “Why doesn’t the State notify claimant that it holds these funds?” “We couldn’t find them” replied the Assistant Attorney General. “You couldn’t find them?” replied the judge incredulously, “The plaintiff employs 20,000 people in this State, counselor. What do you mean you couldn’t find them?” A New York judge recently wrote “The legislature has created a system to swell the coffers of the State Treasury. . . at the expense of the public without giving sufficient notice to the public . . .”
Once corporate property is reported to state unclaimed property agencies, it is difficult for the corporate owner to locate that property and to recover it. Small potatoes? Maybe, but in some instances those potatoes add up to a lot of money.