State’s Auction of Safe Deposit Items Raises Questions

Rare coins, jewelry and keepsakes taken from safe deposit boxes of about 2,000 “lost” Californians will be auctioned today and Friday, but a random check by The Times has raised questions about the adequacy of efforts to find the owners.

In a 24-hour period immediately before the massive sale, The Times was able to find and contact one-quarter of the owners of so-called abandoned property from a sample list of 24 individuals supplied by the state controller’s office.

If the sampling is representative, The Times’ investigation shows that perhaps hundreds of these owners of so-called abandoned property could be found through routine computer checks. But California law prohibits the controller’s office from making such efforts to search for the 6 million individuals--or their heirs--who have $2.4 billion in unclaimed property held by the state.

The controller’s office says it’s up to financial institutions to find the rightful owners of abandoned safe deposit boxes. For their part, bank representatives say the banks do everything required by law to contact rightful owners.

Meanwhile, on Wednesday, after questions from a Times reporter, state officials pulled two Purple Hearts from the auction and asked the California Legislature to exempt military medals from future auctions.

State law requires banks to hand over the contents of boxes or other bank accounts that are inactive for three years, but the banks are first supposed to make an effort to contact the owners. However, only one of the six individuals reached by The Times said such notification had been received.

Three said they were shocked that their property had been turned over to the state, or escheated, and say there could have been no effort made to notify them because none of them had changed residences in decades. Two of the three said they maintain active checking accounts with the same bank that turned over the contents of their safe deposit boxes as “abandoned” property.

“I thought the jewelry was in my [safe deposit] box,” said Alice Rabinovitch, 88, of Beverly Hills when contacted by a reporter about the pending auction of her jewelry Wednesday morning. “I have the key.”

The controller’s office said its last attempt to contact any of these individuals was by a form letter mailed more than three years ago. To send a follow-up would be a violation of state law, says Julie Bornstein, chief deputy controller of external affairs.

“The law specifically prohibits us from doing that,” she said. “To do it would have to be knowingly breaking the law.”

“The onus is on the financial institution to contact the individuals--not the state controller’s office,” said Byron Tucker, a spokesman for state Controller Kathleen Connell. “We are working under the auspices of the law.”

California’s Code of Civil Procedure sets up a formula delineating who does what with regard to abandoned property. This code says the state may not spend more than $15,000 per year to “inform the public about this [unclaimed property] program in activities already organized by the controller for other purposes.”

Until 1992, the controller’s office had a search unit that attempted to find property owners. But during the state’s financial crises of the early 1990s, the Legislature voted to restrict those efforts.

State law sets up penalties for banks that fail to turn over property to the state in a timely fashion. “Any person who willfully refuses to pay or deliver escheated property to the controller as required under this chapter shall be punished by a fine of not less than $5,000 nor more than $50,000,” the code states.

Owners of the items or their heirs have no statute of limitations in filing a claim for the proceeds of the annual auctions, plus accrued interest.

The law’s requirements are less onerous when it comes to notifying property owners that their assets are about to be shuttled off to Sacramento.

Here the law says banking and other financial organizations are required to “make reasonable efforts” to notify these customers by mail if “the holder has in its records an address for the apparent owner, which the holder’s records do not disclose to be inaccurate.”

Bankers mail out numerous notices to “the last known address” that they have for safe deposit box owners before their assets are turned over.

Wells Fargo also searches through its active accounts to see if the property holder has other accounts with the bank, bank spokeswoman Kathy Shilkret said. Aside from checking the bank’s own records, there is no attempt made to determine whether the owner of a safe deposit box has moved or died or become disabled before the box is drilled, housed in safekeeping and then taken to the state controller’s unclaimed-property division.

Bank of America has similar procedures, according to a bank spokesman. However, he was unable to explain why the safekeeping accounts of two holders of active accounts were declared “abandoned” and turned over to the state.

That’s just what happened to the silver bars owned by Karen Fisher of Corona. Her husband had purchased the silver in the early 1980s from a precious-metals program operated by Security Pacific Bank. As part of the program, Security Pacific agreed to hold the silver in safekeeping free of charge. Then Security Pacific was purchased by San Francisco-based Bank of America, which has since merged with NationsBank.

Bank of America did not have a precious-metals purchase program. And it had no free safekeeping accounts. It began to charge Fisher $60 per year to hang onto her silver.

The bills initially went to her deceased husband’s office. When they were finally forwarded to Fisher’s home, she said she contacted the bank and paid the fees. Indeed, the last time she paid the fees--by now the bills came to her home--was in February 1996. She said she has the canceled check to prove it.

When was her property considered abandoned and turned over to the state? In November of the same year, according to documents provided to The Times. Fisher has at least four active accounts with Bank of America, where for about 20 years, she has done business in the same branch. She says she has received no communication regarding the escheat since she paid her last safekeeping bill.

Donnel Loftin’s story is similar.

She, too, had purchased precious metals through Security Pacific. She, too, had free safekeeping until Bank of America took over. However, she said she’s never been in arrears in paying the safekeeping fee. It’s paid every December, she said. Loftin also has numerous active accounts with Bank of America.

“You would think they would check through their own system to find me if it was that important,” she said. “I am not missing. I have never moved from Los Angeles during that time. I have been living in this house with my grandmother, caring for Mother until she passed, for 18 years. I haven’t gone anywhere.”

Gary Hubschman acknowledged that he forgot about his account.

He had been living in the San Fernando Valley and doing business with a small bank that got purchased by San Francisco-based Wells Fargo. But in 1993, he got divorced and moved to Calabasas, where he lived for two or three years before moving to Texas.

“I had a lot going on in my life at the time,” he said. “. . . The safe deposit box was just not a high priority on my list, unfortunately.”

He also says he never received any notification that the contents of his safe deposit box had been turned over to the state. However, since postal forwarding notices expire after six months, it’s possible that a notice was sent and returned to the sender.A bag of silver coins that he had collected was scheduled for auction today. The auction, featuring $600,000 worth of items, is set for 9 a.m. at Hotel Sofitel in Los Angeles.

“I have moved,” Hubschman said, “but I suspect since you tracked me down, they could have easily tracked me down.”

Robert Michael Boundy’s coin collection was also scheduled for auction. He was contacted through his mother, who lives at his last known address in Pasadena. His property, like that of the other individuals that The Times found, has been pulled from the auction.

The controller’s office asked for an amendment to pending legislation Wednesday in response to concerns expressed by a Times reporter. This amendment would allow the state to exempt military medals from future state auctions. That legislation, sponsored by John Dutra (D-Fremont) will be brought to a joint session of the Assembly today in an effort to pull several lots of medals from the auction block. If the medals go unclaimed, they would be donated to a veterans museum.

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Times librarian Janet Lundblad contributed to this report.