Not-So-Safe-Deposit Boxes: States Seize
Citizens' Property to Balance Their Budgets
[What's Yours is Ours - Your Government at Work]
by Elisabeth Leamy, ABC News, May 12, 2008
"Safe" Deposit Boxes
The 50 U.S. states are holding more than
$32 billion worth of unclaimed property that
they're supposed to safeguard for their
citizens. But a "Good Morning America"
investigation found some states aggressively
seize property that isn't really unclaimed and
then use the money -- your money -- to balance
Unclaimed property consists of things like
forgotten apartment security deposits, uncashed
dividend checks and safe-deposit boxes abandoned
when an elderly relative dies.
Banks and other businesses are required to turn
that property over to the state for safekeeping.
The problem is that the states return less than
a quarter of unclaimed property to the rightful
San Francisco resident Carla Ruff's safe-deposit
box was drilled, seized, and turned over to the
state of California, marked "owner unknown."
"I was appalled," Ruff said. "I felt violated."
Unknown? Carla's name was right on documents in
the box at the Noe Valley Bank of America
location. So was her address -- a house about
six blocks from the bank. Carla had a checking
account at the bank, too -- still does -- and
receives regular statements. Plus, she has
receipts showing she's the kind of person who
paid her box rental fee. And yet, she says
nobody ever notified her.
"They are zealously uncovering accounts that are
not unclaimed," Ruff said.
To make matters worse, Ruff discovered the loss
when she went to her box to retrieve important
paperwork she needed because her husband was
dying. Those papers had been shredded.
And that's not all. Her great-grandmother's
precious natural pearls and other jewelry had
been auctioned off. They were sold for just
$1,800, even though they were appraised for
"These things were things that she gave to me,"
Ruff said. "I valued them because I loved her."
Bank of America told ABC News it deeply regrets
the situation and appreciates the difficulty of
what Mrs. Ruff was going through. The bank has
reached a settlement with Ruff and continues to
update its unclaimed property procedures as laws
California's Class Action Lawsuit
Ruff is not alone. Attorney Bill Palmer
represents her and countless other citizens in a
class action lawsuit against the state of
"They figured the safety-deposit box was safer
than keeping it under the mattress," Palmer
said. "In the case of a lot of citizens, they
were wrong, weren't they?"
California law used to say property was
unclaimed if the rightful owner had had no
contact with the business for 15 years. But
during various state budget crises, the waiting
period was reduced to seven years, and then
five, and then three. Legislators even tried for
one year. Why? Because the state wanted to use
that free money.
"That's absolutely correct," said California
State Controller John Chiang, who inherited the
situation when he came into office. "What we've
done here over the last two decades has been
dead wrong. We've kept the property and not
provided owners with the opportunities -- the
best opportunities -- to get their property
Chiang now faces the daunting task of returning
$5.1 billion worth of unclaimed property to
people. Some states keep their unclaimed
property in a special trust fund and only tap
into the interest they earn on it. But
California dumps the money into the general fund
-- and spends it.
"It's supposed to be segregated and protected,"
Palmer said. "California has taken all of that
$5.1 billion and has used it as a massive loan."
California became so addicted to spending
people's money, that, for years, it simply
stopped sending notices to the rightful owners.
ABC News obtained a 1996 internal memo in which
the lawyer for the Bureau of Unclaimed Property
argued against expanding programs to notify
rightful owners. He wrote, "It could well result
in additional claims of monies that would
otherwise flow into the general fund."
Seizing More Than Safe-Deposit Boxes
It's not just safe-deposit boxes. A British man
went to retire and discovered the $4 million in
U.S. stock he had been counting on had been
seized and sold for $200,000 years earlier --
even though he was in touch with the company
about other matters.
A Sacramento family lost out on railroad land
rights their ancestors had owned for generations
-- also sold off as unclaimed property.
"If I had hung onto it, I would be a
millionaire, multimillionaire," said John
Whitley. "But that didn't happen because we
didn't get to hold it."
California's unclaimed property program was so
out of control that, last year, the courts
issued injunctions barring the state from
seizing any more property until it made reforms.
Since then, Chiang has taken several steps to
try to clean up the program.
For example, the state now sends notices
alerting citizens about unclaimed property
before it is handed over to the state -- the
only state to do so. Once unclaimed property is
delivered to the state, it is now held for
several months while the state tries to contact
the owners, rather than it being immediately
sold off or destroyed.
Which raises the question, in the Internet era,
is anybody really lost anymore? California and
other states are just beginning to make use of
modern databases that can find most anyone in
minutes. Unfortunately, California only uses
those databases to search after it has already
seized a citizen's property.
If California does get better at locating
people, that could present another challenge.
Remember, right now, the state spends the money.
"It's like the last guy in line at a pizza
parlor," Palmer criticized. "There is only so
much pizza. At the end, when I get up to the
counter to claim my pizza, there may be no pizza
California's fiscal problems are legendary and
once again in the news, so it's reasonable to
question whether the state can afford to repay
its citizens if a bunch of them surface at once.
"There is always going to be money to give the
owners when they make their claim, " Chiang
insisted. "I don't want my legacy to say I
continued a broken program. I want my legacy to
be 'this guy was the guy who truly cared about
the people and returned their money.'"
California is not the only state to come under
fire for its handling of unclaimed property. In
Delaware, unclaimed property is the third
largest source of state revenue. Idaho recently
passed an unprecedented law that says the state
gets to keep unclaimed property permanently if
the rightful owners don't claim it within 10
short years. And all 50 states pay private
contractors 10 to 12 percent commissions to
locate and seize accounts for them. It's an
inherent conflict of interest: the more rightful
owners are found, the less money the contractors
Of course, there are some states who handle
their people's property with respect. Oregon
never takes title to unclaimed property.
Instead, it holds it in a perpetual trust fund.
Colorado uses the interest on its unclaimed
property fund to pay for some state programs,
but leaves the principal untouched.
Missouri, Iowa and Kansas make extra efforts to
reunite people with their property –even setting
up booths at state fairs to get the word out.
The State of Maryland actively compares the
names on unclaimed accounts with state income
tax records. If it finds a match, the state
simply cuts a check and sends it to the citizen.
Protecting Your Property
So, the question for citizens is, how do you
Make contact with your bank, your brokerage
firm, etc. at least once a year, in a way that
creates a paper trail. Make sure they have your
If you own stock, occasionally vote your proxies
or take other steps to keep your stock ownership
active. Stay in touch with your broker.
Write a list of all your accounts and keep it
with your will, so your heirs will know where to
Consider insuring valuables even if you keep
them in your safe-deposit box. That way, you're
covered financially if the bank or state makes a
mistake and empties your box. Plus, safe-deposit
contents have been known to be destroyed by fire
If you want to search for unclaimed property in
your name, you do not need to pay other people
to do it for you. Check out the following links
for more information:
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article you want to comment on. Wes Penre.
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