Marylanders' Unclaimed Funds on the Rise as State Revenue Source - Southern Maryland Headline News

Marylanders' Unclaimed Funds on the Rise as State Revenue Source

By Annika McGinnis

ANNAPOLIS — It was Joyce Vann’s lucky day.

The Dundalk resident had been walking by a booth that advertised it was “giving away millions” when she thought she’d try her chances — and after her name popped up in the online database listing Marylanders’ lost or forgotten funds, she got $400 in the mail.

“I used it for necessities,” said Vann, who explained she’d been struggling financially when she received it, several years ago. “They were looking for me, and I was happy to be found.”

Vann’s story is just one of many under recently re-elected state Comptroller Peter Franchot’s increased push to “reunite” Marylanders with their lost funds, turned over to the state from forgotten financial accounts.

But while the state is “giving away millions,” it’s raking in even more — through what some see as an increasingly significant revenue source to help pay for state’s everyday bills.

About 60 percent of Maryland’s unclaimed property funds — about $90 million in fiscal year 2014 — goes straight to the state’s general fund, Capital News Service found through a Public Information Act request to the state comptroller’s office.

Marylanders are missing money from abandoned insurance funds, stocks, uncashed checks, bank accounts and more, the state says. This can happen when someone accidentally pays the same bill twice, for instance, or when companies mail refunds to old addresses after the owner moves away.

Under state law, financial institutions must turn over to the state comptroller’s office any of this money after three years of no contact with the owner and unsuccessful attempts to contact them. Though companies can be headquartered anywhere, the property holder’s last address must be in Maryland.

The state holds the money in trust, indefinitely, while searching for its owners through booths at fairs, newspaper and TV ads, video campaigns and an online, searchable database.

Since 2000, the amount of money the state has accrued from so-called “unclaimed property” has soared almost 400 percent: from about $38.4 million in fiscal year 2000 to $150.4 million in fiscal year 2014, according to numbers compiled by the Maryland comptroller’s office.

Under Comptroller Franchot, who took office in 2007, the proportion of that pot the state has successfully returned to Marylanders has also jumped. Between 1999 and 2007, only about 20 to 30 percent of money remitted to the state made it back to its owners; now, about 40 percent is returned, according to the comptroller’s office.

It’s good news for both Marylanders, who get back some lost dollars, and for the state, which generally keeps whatever the original owners don’t come to collect, one unclaimed property expert said.

States generally hold no more than a fourth of the unclaimed funds to pay back potential owners coming to reclaim their money, said expert John Coalson, a partner at national law firm Alston & Bird, LLP.

Maryland retains about 40 percent to cover claims, based on calculations over 10 years of the amount of unclaimed property the state received and how much it repaid to Marylanders, state Assistant Comptroller Joseph Shapiro said.

The rest of the money is fed into a state’s general fund and used to pay the state’s bills: often for education, state employees’ salaries, transportation and more, Coalson said.

“Technically, they will repay it if owners come forward to claim it, but they rarely come forward after – and states treat it as theirs,” Coalson said.

It is becoming an increasingly important source of revenue in some states: in Delaware, it is the third-highest source of revenue in the state, Coalson said.

‘Sherlock Franchot’ on the Prowl

At the Maryland State Fairgrounds’ “Baby Boomer and Senior Expo” fair in late October, revenue claims examiner Faye Johnson called out to fairgoers strolling by her booth.

“Want to check if you got any cash?” she asked one man.

“Oh, sure,” he said, spelling out his name for Johnson to search in the online database.

Five minutes later, the Anne Arundel County man was smiling. He’d discovered a few hundred dollars from an old loan; he planned to use it for Christmas.

“And I was going to walk by!” he said as he left.

Since Franchot took office, the comptroller has “doubled down” on his unclaimed property efforts, said Andrew Friedson, a comptroller’s office spokesman. Revenue claims examiner Faye Johnson, who also worked under the state’s previous comptroller, said television ads and other media efforts have especially picked up.

Franchot improved the unclaimed property website, increased his presence at fairs and released quirky YouTube videos, presenting himself as a pipe-wielding “Sherlock Franchot” on the hunt for Marylanders’ money.

The comptroller also sells on eBay abandoned items left in safe deposit boxes and turned over to the state after three years. If the owner later comes to claim their property, they receive the proceeds from the auction.

In November, eBay seller “mdcompfranchot” was offering silver dime collections from World War II, a gold pocket watch and a solid gold ring spelling out “Mom” with a heart. The going rate for a 1998 Peyton Manning football card was $16.99.

“Lost property and he are bound together on a journey that will twist the very fabric of your finances,” according to “detective” Franchot’s April video on YouTube.

“I wanted to change the world—but I’ll settle with helping you get back your money,” he said. “It’s elementary, my dear Marylanders.”

States Becoming More ‘Aggressive’

Much of the state’s stepped-up efforts center on the audit companies it hires to do the dirty work of holding companies accountable for funds they’re not reporting.

Since 2000 and especially throughout the financial crisis and its aftermath, states across the country became increasingly aggressive in using outside companies to rake in funds, the expert Coalson said.

“They love money, and it’s becoming an increasingly important revenue source for the state,” Coalson said.

One of Maryland’s longtime auditors, Xerox Corp., has brought in $186 million “for the benefit of the state and its citizens” since the mid-1980s and $10 million since 2012, company spokeswoman Jennifer Wasmer said. She said the company uses data analytics to audit companies in 48 states, Washington, D.C., and Puerto Rico. Maryland pays Xerox a 12 percent commission.

In October, the comptroller’s office listed that it had increased the number of hired auditing companies from five to eight, and it asked the Board of Public Works for $9.6 million more to pay them in estimated commission over the next five years. The state expected they would bring in about $90 million by Nov. 30, 2019.

Friedson in the comptroller’s office said it was “a product of success” — a result of the companies performing “well beyond the expectations.”

“That’s great news for the state and great news for Maryland taxpayers, particularly at a time in a difficult economy when folks could really use the money,” Friedson said.

The comptroller’s office was recommending the new contracts for the auditing companies because “each has the potential to collect revenue for the State of Maryland,” the board’s agenda item read.

Coalson said the auditors themselves have taken “extremely aggressive positions.” In the past, they would require a “returned mail” posting to determine a property was unclaimed, but now, often the only requirement is three years of no activity on a person’s financial account.

Life insurance companies are also a major new source of funds. Until around 2012, they had not been reporting “unclaimed” death benefits, said Caroline Marshall, general counsel for Connecticut-based audit firm Verus Financial, which specializes on these claims and works for Maryland.

“As a result, a tremendous amount of property was identified and (went) to Maryland,” Marshall said. Of the state’s 2014 fiscal year unclaimed property revenues, life insurance made up $18.2 million, or 21 percent.

Often, states get a lot of money through “extrapolating,” or estimating, how much companies incorporated in the state would have delivered in unclaimed property for years when they don’t have information available, Coalson said.

Since that money is not tied to any real people, a state automatically gets to keep it, Coalson said.

However, though 56 percent of fiscal year 2014’s unclaimed property revenues came from corporations, the assistant comptroller Shapiro said, Maryland only accepts property tied to Maryland addresses or owners and does not estimate funds.

“At no time does the State of Maryland accept an estimate of property owed as that would only further prolong and complicate the process of returning all of the funds to the rightful owner,” Shapiro wrote in an email.

Coalson said because states continue to garner more from these funds, he does not see the trend ending anytime soon.

“It’s not sustainable,” Coalson said. “This could well be a highwater mark.”

For revenue claims examiner Johnson, giving more money back to Marylanders is simply self-gratifying. She remembered a man who “could hardly wait to get out of here” to give the money he’d discovered to his son.

“When I put a smile on somebody’s face, it puts a smile on mine,” she said.

Though Johnson herself hasn’t yet found any unclaimed properties, she won’t give up hope. Maybe one day she, too, will get lucky.

“For me — no, no, I looked a lot for me, but no, nothing for me. But I don’t give up,” she said, “because you never know.”

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