When a Word Isn’t a Bond

Early last year Judi Haase made an unsettling discovery: The $5,000 Department of Water and Power bond she meant to hold for a rainy day had been seized through a legal loophole by the city of Los Angeles.

Haase had inherited the bond from her father and it had matured in 1997.

Still, instead of cashing it, the retired schoolteacher from San Pedro put it in her safe-deposit box.

When she just happened to check up on it, she learned that the bond had been taken back by the city through a maneuver known as “escheatment.”

State law, in fact, lets cities reclaim any uncashed bond that has reached maturity three years prior, as if it were property abandoned by a person dying without a will.

After complaining to City Hall for months, Haase got her money back -- but not before fighting her way through a bureaucratic thicket.

On Tuesday, Joya C. De Foor, the city treasurer, defended the action as lawful while acknowledging that the city had returned about $450,000 worth of funds to bondholders claiming they were wronged by the process.

“I had to fight to get back what was rightfully mine, but you shouldn’t have to do that,” Haase said this week. “My dad invested in these bonds in the 1970s. It wasn’t just to profit; it was to help the city. People had some confidence in those days and it’s just stabbing you in the back when you’ve made an investment in the city and then they take it away from you.”

The story behind the seizures begins in 2002 when, according to De Foor, then-Mayor James K. Hahn challenged the heads of city departments to be more efficient and identify money that could be used to help balance the budget.

De Foor took the directive to heart and in January 2003 began the escheatment process.

Because state law requires that the public first be told of a pending escheatment, the city placed two advertisements in the Los Angeles Daily Journal, a newspaper that covers law and real estate matters, telling bond owners they had until late the following month to claim their money.

No claims were received so De Foor reported to the City Council that she had identified $3.6 million from the DWP and other bonds and was seeking permission to transfer the money to the general fund.

The council approved the action unanimously.

Fast-forward to late 2004, after Haase discovered that her bond had been escheated. She had to look up the word in the dictionary; the definition she found was “the reverting of property to the lord of the manor (in feudal law), to the crown (in England) or to the government (in the U.S.) when there are no legal heirs.”

Haase had worked as an elementary schoolteacher for the Los Angeles Unified School District for 25 years and knew a thing or two about bureaucracy. She had no hesitation about fighting City Hall.

She began by calling Councilwoman Janice Hahn, who represents San Pedro.

That led to 16 months of exchanges, mostly by e-mail, and a meeting with Hahn and De Foor.

On Dec. 7, 2004, Haase received this e-mail from Caroline Brady-Sinco, then a Hahn deputy: “According to Ms. De Foor, about $9 million was escheated and returned to the city to help balance the budget. Claims for more than $300,000 have been turned in by people such as yourself who want their money back.

“Ms. De Foor is recommending that the funds SHOULD NOT be returned unless someone has a hardship claim. For example, one woman is legally blind and therefore could not have read the notice in the newspaper.”

A few weeks later, in early 2005, De Foor wrote a memo to the council stating that the city had brought in about $7.5 million from bond escheatments in the previous two years and that “no verified complaints seeking recovery of all or a designated part of the money have been filed in a court of competent jurisdiction.”

But Haase had contacted Hahn.

And on the very same date a fruit farmer from the San Joaquin Valley town of Selma had sent a letter to Councilman Bernard C. Parks, chairman of the council’s budget and finance panel, complaining that the city had escheated $135,000 in bonds from him while he was in a hospital recovering from a stroke.

“Had I not been near death, I may have been in better position to be aware of the city’s 48-day notice. Unfortunately, as it turned out, I was not,” wrote Donald Serimian, then 74 years old.

Serimian eventually hired a well-known City Hall lobbyist named John Q. Lee to help him get his money back.

So what finally happened?

The city attorney’s office weighed in last December with a four-page report -- eight months and one day after Hahn and the council had asked for an opinion on the matter.

“No claims were timely received, and thereafter the funds were transferred to the general fund as property of the city,” wrote Chief Assistant City Atty. David Michaelson.

Michaelson wrote that L.A.’s policy on escheatment was similar to that of other major cities and that in most cases escheated funds could not be returned to the original owners.

Nowhere did Michaelson address the issue that so infuriated Haase: that the city never tried to contact her directly and instead relied on a specialty newspaper catering mostly to legal and real estate professionals to get the information out.

But then quietly, in the early weeks of 2005, the city began issuing checks to those who had complained that their bond money had been unfairly taken.

Haase received her check for $5,000 in late March, the day after she mailed a packet of her correspondence with city officials to a newspaper.

Serimian also got his money back, in several installments, said Lee, his lobbyist.

The issue landed back before the council Tuesday, with Councilwoman Hahn demanding that De Foor write a report outlining new policies on public notification.

“When you owe parking ticket money we find you, but when it’s the other way around, we don’t,” an angry Hahn said.

In an interview, De Foor recalled 2002 when, she said, “there was a structural deficit” in the coming year’s budget “and the administration challenged all the general managers to improve how the city did its business and to look for opportunities” to find money for the general fund.

Looking back, De Foor said it was the job of the city clerk to choose in which newspaper to publish the notice of the city’s bond escheatment and that today she would select a publication with greater reach.

“I guess I didn’t form an opinion until those issues arose,” she said.