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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: What are the most important personality traits for an unclaimed property professional? 

Posted By Administration, Thursday, June 15, 2017
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 are the most important personality traits for an unclaimed property professional to have? 

 

“The most important personality traits are patience, good organizational skills and attention to detail.”—Martina Bantham, financial analyst, State Farm Federal Credit Union

 

“I look for people who have at least a basic understanding of unclaimed property, are organized (to manage volumes of data), are patient (helps with obtaining information needed from stakeholders or responses from states) and detail-oriented (to manage the complexities of varying state requirements).”Janeá D. Matchett, unclaimed property program director, Cox Enterprises Inc. 

 

“I believe that the most important personality traits for an unclaimed property professional to have are: ambitious/motivated, decisive, determined, involved, reliable, persistent and interested.”Krystal Greiten, supervisor – unclaimed property, Occidental Petroleum Corp.

 

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:  hiring  unclaimed property  UPPO Asks 

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Litigation Update: Supreme Court battle over MoneyGram “official checks” begins taking shape

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Monday, June 12, 2017

Delaware v. Pennsylvania and Wisconsin and Arkansas, et al. v. Delaware (U.S. Supreme Court)

MoneyGram has been involved in a number of lawsuits involving Delaware, Wisconsin and Pennsylvania. The states are each claiming right to MoneyGram’s official checks. Delaware claims MoneyGram should escheat the property to Delaware because it is MoneyGram’s place of corporate domicile. Wisconsin and Pennsylvania argue that the official checks should be remitted to the jurisdiction in which the purchase took place. 

 

A key issue is whether the unclaimed funds attributable to the official checks should be escheated in accordance with the federal priority rules set forth in Texas v. New Jersey, or whether they should be escheated in accordance with the rules set forth in the Disposition of Abandoned Money Orders and Traveler’s Checks Act, 12 U.S.C. sec. 2501 et seq.

 

More than two dozen other states have joined Pennsylvania and Wisconsin in the lawsuits against Delaware. In October 2016, the U.S. Supreme Court (“Supreme Court”) agreed to hear the cases, and consolidated the two cases into one.   

 

(Learn more about the cases involving MoneyGram that led to Delaware v. Pennsylvania and Wisconsin: Part 1 and Part 2.)

 

Special master appointment

In disputes involving two or more states, the Supreme Court has original jurisdiction under the U.S. Constitution and the U.S. Code. In order to efficiently consider and manage such original jurisdiction cases, the Supreme Court may appoint a “special master” to act as a de facto trial court, responsible for gathering facts, taking testimony and making recommendations to the Supreme Court.

 

On March 29, 2017, the Supreme Court appointed Circuit Judge Pierre Leval of the Court of Appeals for the Second Circuit as the special master for this case.

 

Case Management Order No. 1

On May 12, 2017, Special Master Leval issued Order No. 1 in the case. It indicated that a status conference would be held in New York City on June 5, 2017, whereby the special master would meet with counsel for the parties and MoneyGram Payment Systems Inc. to discuss formulation of a Case Management Plan. Our understanding is that arguments on certain motions of the parties would be heard at such conference, as well as discussions pertinent to a letter from legal counsel for one of the parties requesting bifurcation of the proceedings. Such request asked that the case be bifurcated into two stages: (i) a first part to determine liability, and (ii) a second phase to determine damages, if needed. 

 

UPPO will continue to monitor and report on this case as it develops.

 

About the contributor
Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property, is a frequent author of unclaimed property articles and whitepapers, and is a co-author of the Bloomberg BNA Unclaimed Property Portfolio, Corporate Practice Series.  Schaunaman is a member of the Oklahoma Bar Association.    


Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

 

 

Tags:  Delaware  litigation  money orders  MoneyGram  official checks  Pennsylvania  unclaimed property 

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Office Depot case takes on federal priority rules

Posted By Administration, Thursday, June 1, 2017

On May 4, 2017, UPPO filed an amicus brief with the U.S. Court of Appeals for the Third Circuit in the case of Office Depot v. Cook. The amicus brief supports the arguments of the plaintiffs, retailer Office Depot and its gift card management company, North American Card and Coupon Services (NACCS). 

 

Like many retailers, Office Depot established and uses a special purpose entity for oversight and management of its gift cards and gift certificates. The gift card management company, NACCS, was incorporated in 2002 in Virginia, which exempts gift cards from unclaimed property reporting. NACCS does not collect names and addresses of gift card or certificate purchasers. 

 

As part of an audit that began in 2013, Delaware’s third-party auditor, Kelmar, requested information from Office Depot that included detailed records regarding NACCS transactions. Office Depot declined to provide this information, arguing that NACCS transactions fall outside of Delaware’s jurisdiction under the priority rules established by the U.S. Supreme Court in Texas v. New Jersey

 

As a result of Office Depot’s refusal to turn over requested NACCS documentation, Kelmar subsequently referred the issue to Delaware’s attorney general for “enforcement action.” 

 

On July 18, 2016, Office Depot and NACCS filed suit  against Delaware unclaimed property officials, seeking a declaratory judgment that the state’s unclaimed property practices violate the Fourth Amendment and federal common law. The plaintiffs argue that:

  • The defendants’ information request amounts to unreasonable search and seizure.
  • Delaware’s unclaimed property laws violate the federal priority rules established in Texas v. New Jersey.

On March 3, 2017, the U.S. District Court of Delaware dismissed the case, saying that the priority rule cases cited by Office Depot apply only to interstate disputes, but not disputes between private entities and states. Office Depot appealed the ruling to the Third Circuit Court of Appeals.

 

“Delaware is arguing that holders can’t rely on the federal common law rules and that the state has the right to essentially demand any and every bit of documentation or information concerning how a retailer set up its gift card structure,” says Ethan Millar, partner with Alston & Bird. “If Office Depot prevails in this case, then Delaware will be significantly limited in its ability to challenge these structures.”

The priority rules permeate many aspects of unclaimed property compliance—beyond just the retail industry. On a larger scale, the Office Depot case takes aim at any holder’s ability to rely on the federal priority rules to determine the states to which they should escheat unclaimed property.

 

“If the court determines the federal common law rules do not apply to disputes between a holder and a single state, that will invite chaos as a matter of compliance because holders will have to try to anticipate claims by states that wouldn’t normally have a claim under those rules,” Millar says.

 

In addition, invalidating the priority rules in disputes between single holders and states could affect states’ use of estimation. Losing the weight of the priority rules would make it much more difficult for holders to argue that estimation is impermissible because the state is trying to escheat something other than the actual debt that’s owed. Also, because the priority rules are the foundation for the argument against having to escheat foreign-owned property to a state, this case’s decision could affect how holders deal with such property.

 

UPPO’s amicus brief raises several arguments in support of Office Depot and points to a previous Third Circuit Court of Appeals decision as one of the reasons Office Depot should prevail. The 2012 case of N.J. Retail Merchants v. Ass’n v. Sidamon-Eristoff case similarly involved a state’s attempts to escheat gift cards by taking a position different from what the federal common law rules required.

 

The Third Circuit held that the federal common law rules were intended to be rules of general application. Even though they were created under the U.S. Supreme Court’s jurisdiction to resolve disputes between states, that doesn’t mean they’re limited to interstate disputes.

 

The N.J. Retail Merchants case is not an outlier. The Tenth Circuit reached a similar conclusion in the 1986 American Petrofina Co. of Texas v. Nance case, and several lower federal court and state supreme court decisions concur.

 

UPPO will continue to monitor and report on this case as developments occur. UPPO’s amicus brief was written and submitted on behalf by Ethan Millar and John L. Coalson Jr. from Alston & Bird; James G. Ryan and Jameel S. Turner from Bailey Cavalieri; and Michael Rato from McElroy, Deutsch, Mulvaney & Carpenter.

 

 

Tags:  compliance  Delaware  Office Depot  priority rules  unclaimed property 

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Michigan enacts new audit standards

Posted By Administration, Thursday, May 25, 2017

Earlier this spring, the Michigan treasurer enacted new audit standards for examination, authorized under the Michigan Uniform Unclaimed Property Act. Following is an overview of those new standards.

 

Rules and rights

The state unclaimed property administrator is charged with determining who will undergo examination. Use of collection goals or quotas is prohibited. If someone under audit believes a contracted auditor is acting outside of the scope of the Act, policy or procedures, a review may be requested and will be carried out by the administrator.

 

Auditor standards

Auditors are expected to meet specific professional standards and supervision requirements, and follow specific fieldwork standards. Their planning should include a timeline for each examination segment, the property types to be included and the documentation the audit subject may need to provide. The timeline should account for whether or not the audit subject intends to provide electronic records.

 

Auditor documentation should provide sufficient detail to enable an experienced auditor with no connection to the examination to understand: the documentation of work performed; the property types reviewed; any estimation techniques used; and calculations that form a basis for the examination findings.

 

Process

For audits conducted only on behalf of Michigan, the state administrator is responsible for notifying and examination subject of the audit, providing the auditor’s contact information and the administrator’s contact information. For audits conducted on behalf of Michigan and at least one other state, the administrator submits an audit authorization to the auditor.

 

The auditor and examination subject are expected to reach agreement on a nondisclosure agreement within 30 days of the notice of commencement of the examination. The auditor is also responsible for ensuring confidential records remain confidential.

 

Before or during the opening conference, the administrator establishes whether the audit subject is an “eligible holder.” The audit standards provide a timeline and process for the audit subject to dispute its standing as an eligible holder.

 

At the opening conference, the audit subject receives a copy of the auditor’s contract with the state. The administrator is charged with investigating complaints that the auditor is not complying with the contract or examination standards. If appropriate, the administrator may replace the auditor with another auditor to complete the audit.

 

The auditor is also responsible for providing:

  • A list of states participating.
  • A description of the components and stages of the audit.
  • Expected duration.
  • A description of the responsibilities of the audit subject and auditor.
  • The potential types of property that may be subject to examination.
  • An initial records request.
  • The time period subject to examination.
  • The applicable dormancy periods for each property type.
  • Explanation of examination methods, including estimation techniques that may be used.
  • A summary of the opening conference.

 

Remediation

After the preliminary audit findings, the auditor will provide a copy to the exam subject, beginning a 120-day remediation period. During the remediation period, the exam subject can provide documentation demonstrating that property presumed abandoned should be removed from the final report.

 

Final conference

Within 30 days of the end of the remediation period, a final conference will occur. The audit subject’s total liability will be calculated at this conference. The auditor may adjust the liability based on information received during the final conference. Within 45 days, the auditor will file the examination report with the administrator and provide a copy to the audit subject.

 

 

Tags:  audits  Michigan  unclaimed property 

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Texas responds to UPPO’s request for clarification of H.B. 1454

Posted By Administration, Thursday, May 18, 2017

Passed in June 2015, Texas law H.B. 1454 goes into effect on Sept. 1, 2017. The law allows property owners to designate a “representative for notice,” which triggers a requirement that the holder must mail or email the required due diligence notice to both the representative and the owner.

 

Representatives may not claim or access the owner’s property, but can stop the dormancy period by communicating with the holder knowledge of the owner’s location and confirmation that the owner has not abandoned the property. The new requirements also require holders to include the name and last-known mailing or email address of the representative when reporting unclaimed property.

 

In December 2016, UPPO posed several questions to Texas unclaimed property officials in an effort to receive clarity about the new requirements for the holder community. On April 24, 2017, Texas responded. The letter from Texas is prefaced with a statement advising that the letter is intended to provide general guidance and that no formal changes have been adopted by the Texas Comptroller of Public Accounts (comptroller).

 

Covered property types

UPPO sought clarity regarding which property types are covered by the law, specifically asking if IRAs and both open-end and closed-end mutual funds are covered. In its response, Texas specified that funds deposited with a bank or other financial institution in an interest-bearing account, checking account or savings account are included. This includes mutual funds held in an IRA, but those “would not be subject to abandonment until they would normally be reportable as unclaimed property.”

 

Methods to obtain representative information

Texas clarified that although the comptroller will provide a form holders may provide to owners to designate a representative it is not required and therefore other methods used to collect this information are acceptable. Texas expects to make the form available before Sept. 1, 2017, and “anticipate[s] that holders will inform customers of the option to designate a representative.”

 

Criteria for becoming a representative

UPPO requested clarification regarding specific criteria for being designated a representative and whether the designated person has to provide consent. Texas responded that it anticipates requiring that the representative be an individual over 18 years old who does not own the account. The state doesn’t anticipate requiring a legal relationship between the owner and representative, or requiring consent.

 

Duration and reporting of representative appointment

Texas anticipates its representative designation form will give holders the ability to specify the duration of the designation, according to the letter. Without such stipulation, the designation would be perpetual unless revoked. It seems likely that the form will actually give the ability to specify the duration of the designation to owners—not holders—and that the wording in the letter was an error.

 

Holders would not need to notify the comptroller of changes to designated representatives, only to list them when reporting unclaimed property. The comptroller is updating its electronic holder report format to accommodate representative details. The updated format should be announced before Sept. 1, 2017.

 

Multiple accounts

The state clarified that the representative designation form will give owners the ability to specify the accounts for which the representative is a designee. There will be an “all accounts” option. Communication from the representative regarding one account does not affect the abandonment period for any accounts for which that person is not designated as a representative.

 

UPPO will continue to monitor implementation of H.B. 1454 and will report on additional developments as needed.

 

 

Tags:  compliance  due diligence  Texas  unclaimed property 

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