Fix Sought for Property Bill

State lawmakers are scrambling to fix an “amnesty” bill that’s on a fast-track through the Assembly, in hopes of plugging a loophole that could let some companies that have been caught violating the state’s unclaimed-property laws avoid millions of dollars in fines.

The bill is being touted as a revenue-raising move that will bring roughly $35 million to the cash-strapped state treasury by collecting forgotten refunds, bank deposits and other assets long abandoned by customers of banks and other companies. State law requires these assets to be turned over to the state for safekeeping if they are unclaimed for at least three years.

But officials at the state attorney general’s office realized late last week--after the bill had passed the state Senate--that wording in the bill could let companies be absolved of penalties by joining the amnesty program, even if these companies already were being investigated for violating unclaimed property laws.

“The intent is not to give companies that we are investigating a free ride,” said Hallye Jordan, spokeswoman for the state attorney general. “We will be offering amendments to ensure that the bill’s intent is upheld.”

Burbank real estate executive Bill Bowen, who is battling the banking industry in court over the issue of unclaimed customer accounts, contends the amnesty bill could become a multimillion-dollar giveaway to banks doing business in California if it’s not amended. Bowen’s 1999 state court lawsuit alleges that banks owe the state millions in interest and penalties stemming from unclaimed property that hasn’t been turned over to the state in accordance with the law.

“This is [supposed to be] an amnesty, not a ‘get out of jail free’ card,” said Bowen, who operates HomeownersRights.com.

The bill was needed because the state’s previous unclaimed property amnesty program expired at the end of last year, state officials said. Under that program, companies that hadn’t turned over unclaimed property in a timely manner--a practice known as “escheating”--could voluntarily surrender the property without being hit with interest or penalties.

Some companies were unable to participate in last year’s program because they were affected by the Sept. 11 terrorist attacks, or because they learned about the program too late in the year, according to the Department of Finance. Companies discovered to be holding unclaimed property in violation of state law can be assessed interest of 12% a year on the value of the assets, as well as other penalties.

“It would not be equitable for the state to charge these businesses an interest penalty for property that otherwise would have been remitted under the amnesty program,” the Department of Finance wrote in support of the pending amnesty bill.

If the amnesty bill is passed, state officials expect roughly $35million to $40 million in property to be turned over to the state. This property includes abandoned bank accounts, contents of safety deposit boxes, as well as unclaimed tenant deposits, bill overpayments and refunds.

While abandoned property is owned by the people who lost it and not the state, the state is able to use the money until it is claimed by the rightful owners, said Richard Chivaro, general counsel for the state controller’s office.

Under the amnesty bill passed by the Senate last week, companies could participate in the amnesty program as long as they weren’t subject of an investigation by the state attorney general’s office for violating unclaimed property laws or are facing a pending audit or litigation involving the controller’s office as of Jan. 1, 2003.

Critics such as Bowen worry that the law could provide unintended protection for companies that were investigated prior to the trigger date in the law. That would include the banks he’s suing, jeopardizing a potential windfall for the state.

If his lawsuit is successful, Bowen contends, banks could be required to pay $600 million in interest and penalties to the state. But the state wouldn’t be able to collect, Bowen says, unless the amnesty bill now pending in Sacramento is changed.

Several banks contacted declined to comment on the amnesty bill or Bowen’s lawsuit.

Lawmakers are now trying to amend the amnesty bill so companies won’t be able to escape fines and penalties if they are later found to have violated the state’s unclaimed property laws.

“We want to make sure that businesses suspected or convicted of wrongdoing cannot participate in the amnesty program, which is really a gesture of goodwill by the state,” said Chris Tapio, legislative director for Assemblyman John Dutra (D-Fremont), who is sponsoring the bill.

“That is what we meant to say all along. Some might argue that the bill already does. But this is to make it crystal clear.”