Not-So-Safe-Deposit Boxes: States Seize Citizens' Property
to Balance Their Budgets By ELISABETH LEAMY
- abcnews | May 12, 2008
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 owners.
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 change.
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 California.
"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 back."
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
"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
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 for me."
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
"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 protect yourself?
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 current address.
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 look.
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 or flooding.
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: