Bank Errors Cost Clients Millions in Lost Property
As much as $260 million in property held by the state of California is virtually impossible for the rightful owners to reclaim because their names have not been recorded, a Los Angeles Times investigation has found.
About 700,000 Californians may have permanently lost savings deposits, coins, jewelry, collector’s items and other possessions because their names never made it into a database of “missing” property owners, either because their banks or the state failed to keep good records on them or because the value of their property was considered too insignificant to track.
The property was sent to the state as the result of escheatment laws, which require banks, escrow companies, utilities and others to turn over inactive accounts--those undisturbed for three years or more. If an institution fails to escheat promptly, it is subject to large daily fines and interest penalties.
The state enforces--with a staff of 20 auditors and a $2.1-million annual budget--the section of the law that requires banks to promptly send funds from dormant accounts, according to the California controller’s office.
The budget to find the individuals whose property is in state coffers, however, is just $15,000. And the state has no budget for advertising or notification, although its database of abandoned accounts can be searched on the Web at https://www.sco.ca.gov/col/ucp or by calling (800) 992-4647.
The unclaimed-property division of the controller’s office holds assets valued at $2.4 billion in trust for about 7 million people. Much like Uncle Sam with the Social Security trust fund, however, the state can use the unclaimed money to pay expenses--from payroll to public works--and doesn’t need to replace it unless it is claimed.
A previous Times investigation found that many of the people listed in the abandoned-property database were easy to track down--some live in the same houses they’ve occupied for decades.
A new investigation by The Times, however, indicates that about one in 10 owners of unclaimed property could not even be identified because their names have been lost or were never recorded.
Sometimes the amounts involved are trivial. But some owners say the value of their property is many thousands of dollars and, moreover, that they never abandoned it in the first place.
They have vainly searched for assets that appear to have fallen into a bureaucratic black hole created by lax consumer protection laws and sloppy bank procedures, sometimes the result of confusion caused by recent mergers. Their names don’t appear on any records. Their money--in some cases their life savings--and their family heirlooms have simply disappeared. No one can account for them and no one is willing to take responsibility for what was lost.
Consider Alton Paul Bienaime, a 79-year-old Angeleno.
Bienaime’s life savings--$37,000 that had been in bank certificates of deposit--has disappeared. He is stuck in a Catch-22: He knows that somebody--probably the state’s unclaimed-property division--has the money. But the state keeps referring him to his bank; his bank keeps referring him to the state. Bienaime’s name isn’t in either party’s records--only on the CD papers he clutches in his fist.
“I’m sorry to be emotional about this,” he says, his voice cracking. “It’s just that I’m 79 years old, and I was hoping to have this money to leave to my wife and my son.”
Byron Tucker, spokesman for the controller’s office, acknowledges that some property owners’ names are not listed in the state’s computer.
“It says right on our Web page that the database does not include everybody,” Tucker says. “If you think you’re owed property but you don’t find your name in the database, you should call our offices.”
Exactly how many people are affected and how much they’re owed are impossible to determine. The state does not keep such records, says Richard Chivaro, chief counsel for the controller’s office.
An analysis of data provided to The Times, however, indicates that the unknown and unnamed might account for about 11% of the assets held by the unclaimed-property division--about $260 million that may be virtually impossible to find and return.
Tucker says the state has recently been clamping down on requiring banks to put names on property they send to the state. Another state official who administers the claims says that finding property filed without a name attached to it is “a needle-in-a-haystack situation.”
Not-So-Safe Deposit Boxes
The people who are missing from the database appear to fall into three broad categories:
* Those whose names have not yet been entered into the computer.
* Those whose property is in the computer but is under the heading “Owner unknown,” often because a bank or other institution never sent a name to the state.
* Those who are owed such small amounts that the state doesn’t require anyone to keep track of them.
The Times’ analysis looked at just the last two of these categories. (The Times has filed a Public Records Act request to obtain data in the first category but has not yet received an adequate response.)
The analysis, which covered a listing of 2,055 lots of gold, jewelry and memorabilia sold at a recent unclaimed-property auction of safe deposit box contents, found that the ownership of 228 lots was undeterminable. Of those, 62 represented safe deposit boxes that contained items of significant value and should have had names attached to them but were instead listed as “Owner unknown.”
Another 166 lots fell into the group of assets for which names are not required. California law says that banks can consolidate property worth $50 or less and turn it over to the state without saying who owns it.
Why would anyone pay a fee of $15 to $60 annually to keep items of marginal value in a bank safe deposit box? Usually they don’t.
Instead, Tucker says, these items are often the result of banks’ sweeping the safe deposit rooms and finding an earring, coin or other item that a box owner has dropped. The volume of this type of material--166 lots’ worth in the state auction in May, including stamps, watch collections, medal collections, silver and gold jewelry--raises the question of how much effort banks and the state are putting toward finding the owners.
Many of the people who contend their property has disappeared say they had items far too valuable to be consolidated under the “under $50” rule. They may be among the unconsolidated “unknown”--a group that accounted for 62 of the 2,055 lots in the May auction.
Complaints Go Unanswered
Consider Susanna Stumpf, an 86-year-old Los Angeles retiree. Long ago, her husband opened a free safe deposit box with a local bank at which they also had several other accounts, she says. In January, after the bank was merged with another institution, they got letters saying their savings accounts were inactive and about to be turned over to the state as abandoned property.
Stumpf says she hurried to the bank to straighten things out. She assured employees that her savings accounts were not abandoned, then asked to see her safe deposit box.
She says she was told she had no box. In fact, that branch had stopped offering boxes years before. Although Stumpf has lived in the same house for 30 years, she says, she received no notification of the change.
“All they could tell me was to contact the state office of lost property in Sacramento,” Stumpf says. “We wrote letters. None of the letters was ever answered. The last time I talked to the bank, they made me so angry. They said, ‘We have no proof you ever had a safe.’ I said, ‘What about the key I have?’ He said, ‘That doesn’t prove anything.’ ”
Stumpf says the box held gold and her mother’s platinum Cartier watch, set with diamonds and sapphires. The monetary value totals tens of thousands of dollars, she says, but the sentimental loss is far greater.
“I am not going to trust these safes anymore,” she says.
Could items of such great value really have been sent to the state without Stumpf’s name attached? Definitely, according to Nancy Cockran, a Brentwood resident who says it nearly happened to her. Cockran recently tried to retrieve papers from her safe deposit box at a bank where she has numerous other active accounts. No box. Clutching the key, she demanded to see the manager.
The next day, they found her property in an envelope marked “Owner unknown.” She says the bank has never explained why it drilled open the lock on the box, why it never notified her, or how the documents proving Cockran’s ownership could have been lost.
Cockran says the first document she pulled out of the envelope was the deed to her house, which included her name and current address. That would not have helped her retrieve her assets if the property had ended up with the state, however. Anything that is determined not to have tangible financial value--letters, personal papers, photographs--is destroyed, Tucker says. The state doesn’t have the room to store them.
What these consumers experience should never have happened, bankers and state officials agree. If a customer has an account but doesn’t deposit or withdraw from it for several years, the bank is supposed to send a letter or postcard notifying the customer that the account is dormant and will soon be sent to the state. Safe deposit boxes are not supposed to be considered dormant unless the customer fails to pay the box fee for at least three years.
But customer records--and tracking--have sometimes fallen by the wayside in the wake of rapid consolidation in the banking industry.
“There are a lot of things that can go wrong both on our side and the customer’s side,” says Kathy Shilkret, a Wells Fargo spokeswoman. “If a customer gets a bill for a box that’s always been free, their first reaction may be that it’s a mistake, so they disregard it.”
California’s unclaimed-property law may also be to blame. The law’s only requirement for consumer notification is that banks make a “reasonable attempt” to alert customers before their accounts are turned over to the state. The penalty if they don’t?
“There are no penalties for not notifying customers,” says Shilkret, who hastens to add that Wells Fargo and other institutions attempt to notify customers anyway. “The penalties are all on the side of failing to report or pay the money to the state.”
She adds: “It seems to me that the whole system needs to be rejiggered.”
