State Asks to Keep Idle Account Funds : Finance: The $40.4 million was illegally taken from dormant accounts by Bank of America. The owners can’t be found, officials say.
State Controller Gray Davis wants to cancel an extraordinary attempt to reunite missing Bank of America customers with $40.4 million of their money and instead use the funds to reduce the state’s cash shortage.
In papers filed with the Sacramento Superior Court, Davis said he has “exhausted all reasonable” efforts to find owners of the unclaimed money that was illegally kept by the bank. He argued that searching any further would “not be cost-justified.”
Davis thus is trying to end a marathon struggle that started 15 years ago when the bank was sued for recovery of the depositors’ funds. The state got most of what it sought.
Basically, the money represents the remaining cash portion of a combined $53-million cash and land transfer settlement worked out in 1988 on behalf of customers whose bank accounts had become dormant and were improperly wiped out.
Davis, who needs the permission of Judge A. Richard Backus to end the ambitious two-year project, also disclosed in court papers that nearly $5 million had been spent on the special “reunification” effort. But it produced payments totaling only $1.1 million.
“It is better to have spent $5 million to return $1 million to the rightful owners than to have done nothing and denied these people their forgotten assets,” said Deputy Atty. Gen. Yeoryios Apallas, who represents the controller.
Apallas said the decision to terminate the program was made because “we were just not getting the numbers that we would have liked. Some people (former depositors) have disappeared.”
The unclaimed $40.4 million would make only a small dent in the projected $3-billion shortfall between state spending and income. The funds are held in special trust accounts.
Under the state’s “unclaimed property” laws, financial institutions must attempt to find the owners of accounts that have become dormant after seven years of inactivity. If the owners cannot be found, the funds are transferred to the controller, who must make a similar search.
In theory, at least, the money is kept in perpetuity for the missing owners, who may have died, moved elsewhere or simply forgotten their assets. In practice, the money flows into the state general fund and helps finance government activities.
In the Bank of America case, Judge Backus ruled that the bank illegally had wiped out the dormant accounts of depositors--many of them schoolchildren--by levying service charges. In addition, the bank failed to pay interest on the deposits.
A law enacted after the suit was filed requires financial institutions to notify customers in advance that service charges may be levied on inactive accounts.
Compounding the difficulty in finding the missing Bank of America customers was the bank’s former practice of routinely destroying records containing thousands of names and addresses.
Judge Backus ordered Davis to conduct a special, intensified effort to track down the Bank of America customers who had disappeared, or their heirs, and return the money to them. Involved were accounts that became dormant between 1949 and 1983.
Backus approved a $5-million budget for the project. Among other things, it called for hiring extra employees, obtaining additional computers and telephone lines, contracting with a public relations firm and buying broadcast and newspaper advertising.
In an accounting filed with the court last week, Davis reported the balance at $40.4 million, including $6.7 million in interest. He said he had received 184,024 inquiries, received 16,881 claims, and paid 12,376 claims totaling $1.1 million.
The controller said that although he wants the project abandoned, claims triggered by the Bank of America case would continue to be processed, using a computerized data bank and a permanent toll-free telephone number (1-800-992-4647).