Dispute Swells Over State Pot of Lost Gold

Assemblyman Fred Keeley forgot about $1,000 at a bank in Ohio. State Sen. Tom Hayden accidentally overpaid a hospital $489. And state Sen. Martha Escutia neglected to cash a $500 check from the Bicycle Club, a Bell Gardens card room.

These lawmakers and many others had no clue that they have unclaimed cash buried in state coffers.

California’s unclaimed property fund is huge--$2.6 billion and growing. That means the 5.2 million owners of the property from dormant accounts once held by banks, insurance companies, utilities, media corporations and even card rooms could lay claim to an average $500 each.

Keeley, Hayden, Escutia and other lawmakers are easy to find, but state Controller Kathleen Connell--who is responsible for managing the fund and returning the money to its owners--contends that she is barred by a maze of state restrictions from actively tracking them down.

“We are restricted. No question about it,” said Connell spokesman Byron Tucker. “We’ve been wanting to expand our activities. It has been frustrating. We have not been allocated sufficient funds to do outreach.”

Tucker cites recent state budgets dating to 1993 that contained language barring the controller from using money to find owners of unclaimed property. This year’s budget appears to restrict Connell to spending only $15,000 to inform the public about unclaimed property.

Tucker also blames banks and other institutions, contending that they aren’t doing enough to find the rightful owners before turning money over to the state.

Banking representatives point back at the controller. Once they turn the money over to the state, they say, they have no control over it. And state lawmakers say they are dumbfounded by Connell’s position that she cannot make greater efforts to contact the owners.

Assemblyman Tom McClintock (R-Northridge), whose father is owed $165, quoted Mr. Bumble in “Oliver Twist”: “ ‘If the law supposes that, the law is a ass, a idiot.’ I’d question whether that’s the law.”

“They never have trouble tracking you down if you owe the government money,” McClintock said. “But they seem to have an enormous amount of trouble when they owe you money.”

Sen. Jim Brulte (R-Rancho Cucamonga)--who is owed $242, which an insurance company evidently failed to pay him--suggested that Connell, a Democrat, come to him for help.

“If the controller is prohibited by law from mailing letters to Californians, she certainly hasn’t come to the Senate Republicans asking for the authority,” said Brulte, a budget committee member. “If she does have the authority, but her budget isn’t large enough, she has never approached me and said we need an augmentation.”

Fund Continues to Balloon

While Connell, legislators and financial institutions blame one another, the amount of unclaimed property controlled by the state has ballooned.

A decade ago, the fund amounted to $375 million owed to 1.1 million people and entities. Five years ago, the number of individuals and businesses with unclaimed property numbered 2.6 million, owed $1.4 billion. The numbers have about doubled since 1994, with about 5.2 million individuals and business owed $2.6 billion now.

The biggest beneficiary is the state.

Institutions must turn over unclaimed property to the state if they have had no contact with the owners after three years.

In the recession, the state shortened the period for which banks and other institutions could keep money in dormant accounts, from seven years to five, and then to three. Each time the state shaves another year off the time that institutions can hold the money, the state gets another $100 million, Tucker said.

The money flows into the state general fund--at a rate of about $200 million a year. Unless owners claim it, state lawmakers and the governor are free to divvy it up, along with billions in revenue from general taxes. But owners of the money can claim it whenever they learn of it. When the state returns the money, it must pay 5% annual interest.

The controller, meanwhile, has become more aggressive in the pursuit of unclaimed property, recently launching audits of escrow and title companies and finding more than $13 million owed to past clients that now is in the unclaimed-property fund.

“It’s the sort of thing people get irate over,” Hayden said. “Supposedly, it is your fault for not knowing about it, and since you don’t know, the paternalistic state helps itself to your money.”

Having been informed by The Times of their own potential holiday season windfalls, several legislators are vowing to take more than a passing interest in the fund when they return to Sacramento in January.

“First, I’m going to get my $1,000 back,” said Keeley, a Santa Cruz Democrat. “But it does raise a question of whether the state could assist some folks who are needy by advising them of assets. If there is no notice, how would anyone know?”

As it is, people who believe they have unclaimed property can call the Bureau of Unclaimed Property, (800) 992-4647, or visit the controller’s Web site: www.sco.ca.gov. Once there, click on “unclaimed property” and follow the directions to search the controller’s online database. This is how The Times found the names of lawmakers owed money.

Curbs Blamed on Politics

Several legislators say the state should do more to return the money.

“We shouldn’t have allowed it to get to this point. We ought to intervene so the fund doesn’t keep growing,” said Escutia, who says she doesn’t gamble and has no idea why a card club would owe her money unless she neglected a campaign contribution check.

It’s not as if it takes a detective to find many of the people who are owed money. Indeed, in Keeley’s case, a bank that owed him money apparently sent it to the state of Ohio, which sent it to the state of California, “care of the state Assembly.”

Hayden has been a fixture in California politics for 20 years. Assembly Speaker Antonio Villaraigosa, owed $80, is among the highest profile politicians in the state. So is Treasurer Phil Angelides, owed $47.

While lawmakers may have grown used to spending proceeds from unclaimed property on parks, schools and prisons, their past efforts to limit the controller’s publicity efforts may have been simple politics.

When he was controller, Gov. Gray Davis actively pursued people owed unclaimed property, returning $127,000 to a 93-year-old widow, $3,500 to President Ronald Reagan and $9,095 to then-Atty. Gen. Edwin Meese III. And he got substantial publicity each time--to the dismay of Republican governors who controlled state budgets and were among his rivals.

“Maybe the other constitutional officers don’t want to invest the controller with the authority to do all this great mail,” mused David Sebeck, spokesman for Senate President Pro Tem John Burton. “But that would be the cynical part of me.”