Unclaimed property fund hold $5B

CNY Business Journal (1996+), Aug 02, 2002 by Dickinson, Casey J

SYRACUSE - Spare change? New York State residents have a few billion dollars lying around, according to state Comptroller H. Carl McCall. The comptroller, the legal custodian of unclaimed property, holds 18 million unclaimed accounts awaiting redemption. The $5billion fund consists of property turned over to the state by banks, insurance companies, courts, and corporations. One set of accounts holds more than $700,000 for a single claimant, says Theresa Bourgeois, spokesperson for Comptroller H. Carl McCall. During the 2000-2001 fiscal year, the comptroller received $363 million in unclaimed property and returned $66.8 million to claimants.

Under English legal tradition and current law, unclaimed property has to be surrendered to the government after certain deadlines have passed, says Mitchell Savage, spokesman for Cityvest Financial Corp. New York State has the nation's highest fines, up to $50,000, for failing to "escheat" unclaimed property to the state, he adds. Businesses are required to perform due diligence in locating property owners and surrendering the property to the proper state government. Many times, Savage explains, a business' accountants will simply identify "escheatable" property and surrender it to the state without any attempt to locate the owner.

The majority of New York's unclaimed property takes the form of bank accounts that have been dormant for five years, says Bourgeois.

Cityvest offers businesses unclaimedproperty compliance programs. The company guarantees its work with a promise to pay any fines for its clients. Cityvest examines its clients' records, such as check registers, searching for funds that fall under unclaimed-property statutes. The company attempts to locate the payee and if unsuccessful, escheats the funds to the proper state. Each piece of unclaimed property, says Savage, is subject to the laws of the payee's last known address, rather than the payer's home state.

"The timelines are different for each state," he adds.

Under New York law, an uncashed money order must be surrendered to the state if unclaimed for seven years. However if the property belongs to a resident of neighboring Massachusetts, the deadline is three years. New York declares unused gift certificates escheatable after five years, while Massachusetts claims them in three.

An average Fortune 500 company produces 40,000 to 60,000 records per year that fall under unclaimed-property laws, says Savage. A smaller company will produce far fewer, so a business owner will have to determine if the cost of Cityvest's services will produce a benefit. Clients sign a contract with Cityvest and pay a fee of $2.25 for each unclaimed-property record. The cost, says Savage, is reasonable for many clients, compared with the possibility of multi-thousand-dollar fines. Each client works out the best method of getting records to Cityvest for checking. Many clients transmit the records electronically to one of Cityvest's three offices.

The company's main tool is an attorney-designed computer system to help flag each record. The computer uses all the relevant state and federal jurisdictional laws to determine if a record qualifies as unclaimed. Last year, the software underwent 5,600 updates to keep up with changes in the law.

"The process is extremely automated," says Savage. "Financial records go in one end and compliance comes out the other."

Once a record is identified as unclaimed, Cityvest attempts to track down the owner and deliver the property.

"Our goal is always to find the property owner," says Savage.

Cityvest uses common methods of locating property owners such as sending letters, placing newspaper ads, and using databases. The company sends between 20,000 and 60,000 letters per day, he adds.

Cityvest started in the unclaimed-property business from the consumer side, helping account holders to claim their funds. The company began focusing on corporate unclaimed-property compliance last year and launched its new service earlier this year. Customers in Central New York include Penn Traffic and M&T Bank, says Savage.

Consumers have begun claiming funds in greater numbers since McCall's office introduced a searchable Internet database in 1997. The site, www.osc.state.ny.us/cgi-bin/db2www/ouffrm.d2w/input, allows users to see if the state is holding any of their money as unclaimed funds. The site has helped raise the number of claims from 19,000 to more than 126,000 per year. The recovery procedure is explained on the site. Approximately 1.4 million visitors performed 3.5 million searches during 2000 and 2001, according to the comptroller's office.

In addition to auditing companies for compliance with New York's abandonedproperty laws, says Bourgeois, the comptroller's office works with other states to recover New Yorkers' unclaimed funds. The office holds more than 100 educational events each year to get the word out about the unclaimed funds, she adds.

One of the state's largest unclaimedfunds cases involved $18.1 million in dormant funds held by Bankers Trust Corp. Instead of escheating the funds to the comptroller, the bank used the money to boost its balance sheet. In 1999, the bank paid a $60-million federal fine to settle allegations that it had cooked its books with unclaimed funds.