2014 Holders Seminar - Atlanta
9/17/2014
Build a Better Due Diligence Workshop Presented by: Renn G. Neilson & Angela P. Gholson © 2014 - All Rights Reserved
UPPO Presentation Disclaimer Use of the Unclaimed Property Professionals Organization, Inc., (UPPO) name of copyrighted materials in this presentation does not constitute an endorsement by UPPO of a member, vendor, product or service. The content represents the opinions of the author and not necessarily those of UPPO. This information is not intended as legal advice and should not be used to replace the advice of legal counsel.
© 2014 - All Rights Reserved
UPPO Antitrust Statement UPPO has a policy of strict compliance with U.S. federal antitrust laws. UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or understandings, make agreements, or otherwise concur on positions or activities that in any way tend to raise, lower or stabilize prices or fees. Members and/or attendees can discuss pricing models, methods, systems, and applications, as well as certain cost matters that do not lead to an agreement or consensus on prices or fees to be charged. However, there can be no discussion as to what constitutes a reasonable, fair or appropriate price or fee to charge for any service or product. Information may be presented with regard to historical pricing activities so long as such information is general in nature and does not include data on current prices or fees being charged in any trade area. Any discussion of current or future prices, fees, discounting, and other terms and conditions of sale, which may lead to an agreement or consensus on prices or fees to be charged, is strictly prohibited.
© 2014 - All Rights Reserved
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2014 Holders Seminar - Atlanta
9/17/2014
Today’s Agenda •Wrongful Escheatment •Due Diligence Requirements •Timing •Fraud Prevention •Leading Practices •Internal Due Diligence •Asset Retention •Technology Initiatives
© 2014 - All Rights Reserved
Wrongful Escheatment
Not properly conducting due diligence could lead to wrongful escheatment liabilities Could result in large liabilities for unclaimed property items that do not have a fixed value (e.g., stock) Azure Ltd. v. I-Flow Corp., 210 P.3d 1110 (Cal. 2009) A.W. Fin. Servs., S.A. v. Empire Res., Inc., 981 A.2d 1114 (Del. 2009)
Illustrates the extent to which states have shifted the administrative and compliance burdens to holders
Due Diligence Is Not Always Mandated Two states have no or limited due diligence requirements
Pennsylvania - no statutory due diligence requirement Delaware – only required for securities and related property (e.g., stocks, bonds, dividends, and distributions) valued at $250 or more
© 2014 - All Rights Reserved
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2014 Holders Seminar - Atlanta
9/17/2014
Due Diligence Is Not Always Mandated Due diligence minimums
Letters only need to be sent if the property’s value equals or exceeds the due diligence minimum amount most states follow the model act $50 Illinois $10 Texas $250
No minimums CT, MS, NY, PR
© 2014 - All Rights Reserved
Due Diligence Is Always A Good Idea Good business practice
Re-establishes communication with customers Promotes goodwill with customers, shareholders, and employees Owners may be upset if you do not contact them may get letters from other holders may get letters from you for states where required especially true in states with a claim fee (e.g., Texas 1.5% if value over $100) © 2014 - All Rights Reserved
Due Diligence Is Always A Good Idea May reveal something is NOT unclaimed property Internal fraud control tool Promotes the goal of reuniting owners with their property
© 2014 - All Rights Reserved
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2014 Holders Seminar - Atlanta
9/17/2014
How Due Diligence Letters Should Be Sent Generally, USPS First Class mail is required or will satisfy the requirement
Important to look closely at each state’s rules because there are many exceptions
New Jersey - certified mail return receipt requested New York first class mail; second letter must be sent certified mail return receipt requested if no response to first letter and the property is valued at more than $1,000
How Due Diligence Letters Should Be Sent Most states do not allow deductions for postage
Exceptions: New York certified mail deduction Texas cost of postage Illinois first class postage, stationary, and envelopes
How Due Diligence Letters Should Be Sent California allows electronic communication with prior consent
In other states, email follow-ups are a good idea electronic addresses may be less likely to change than physical addresses can help resolve issues before statutory due diligence
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2014 Holders Seminar - Atlanta
9/17/2014
How Due Diligence Letters Should Be Sent Some states require notice by publication
Delaware – financial institutions, life insurance companies, and courts must publish owners’ names and last known addresses in specified newspapers New York – Financial institutions, utilities, insurance companies, and corporations holding condemnation awards must publish owners’ information (e.g., advertise)
Timing Most states follow uniform act – letters must be sent not less than 60 days and not more than 120 days before the report is due
There are many exceptions:
some state drop the 60 day requirement, so just 120 days before report – AZ, CO, MN, OK, UT, WI
There are many exceptions (Cont.) : Texas – must be mailed by May 1 to owners of property to be included on July report Washington – between May 1 & August 1 California – 6-12 months before report New York – varies based on the property and holder; default is 1st letter within 90 days of report, 2nd letter within 60 days of report
Timing
Earlier is better
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2014 Holders Seminar - Atlanta
9/17/2014
Preventing Fraud Fraud is not a defense to not escheating property Unless the state requires the specific value of the property to be listed, you should consider indicating that the value is in excess of $x, where x is the state’s due diligence minimum Consider requiring returns to be notarized to claim property Consider not requiring for returns stating nothing is owed Weigh anti-fraud measures v. ease of responding
Due Diligence Leading Practices Internal Due Diligence (non-statutory due diligence)
Designate key contacts to lead research efforts within each applicable business unit (AP, Payroll, Accounts Receivable, etc) Send email correspondence to payees in advance of state mandated due diligence letters
Due Diligence Leading Practices Asset Retention
Offer choices on the letter to allow the recipient to indicate whether or not they are owed funds Payee may indicate that funds are not owed or that the obligation has been previously satisfied. In this situation, the funds will be retained by the holder.
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2014 Holders Seminar - Atlanta
9/17/2014
Due Diligence Leading Practices Asset Retention
Identify and research large dollar items prior to compliance season
Identify potential duplicate payments, active customers, or obligations that may already have been settled
Track evidence of customer contact across the organization to avoid escheating active customer funds such as a dormant bank account (online account logins, email correspondence, etc.)
Due Diligence Leading Practices Potentially Increase Response Rates
Offer coupon incentive with mailing (ex. Use coupon by XX date and receive 10% off purchase) Consider sending double sided letters in English and any applicable foreign language Canada: English and French Puerto Rico: English and Spanish
Due Diligence Leading Practices Potentially Increase Response Rates
Utilize third party address locator to identify more accurate customer addresses Ensure your letter is clear and to the point to avoid customer confusion
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2014 Holders Seminar - Atlanta
9/17/2014
Due Diligence Technology Advancements Partner with IT Set up UCP system to send data feeds of letters directly to print vendor Reduce staff having to manually fold letters and stuff envelopes Insert barcodes on response letters for faster processing Partner with internal or external data imaging vendors Avoid having staff manually open letters All customer/payee responses will be imaged and stored for future reference (customer inquiry or state auditor) Build workflow queue to display responses on screen eliminating use of additional paper/printing
Due Diligence Technology Advancements Create a website to allow customers to logon to click and claim their property.
Website can allow the option to upload supporting documentation for accurate validation of claim
Questions
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2014 Holders Seminar - Atlanta
9/17/2014
Contact Information Renn Neilson – Partner Baker Botts L.L.P.
[email protected]
Angela Gholson – Managing Director KPMG LLP
[email protected]
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