Escheat Counseling and Litigation
Every state and territory of the United States has escheat or unclaimed (abandoned) property laws. Escheat-derived revenues generate windfall income for the states, and state unclaimed property administrators have exhibited accelerating interest and vigor in enforcing unclaimed property laws and issuing escheat audit notices to public companies. Yet few companies have comprehensive escheat procedures, and members of senior management are rarely even aware of escheat law compliance as an issue having ramifications for the accuracy of the company's financial reporting.
Sidley’s Escheat Counseling and Litigation group is a cross-disciplinary team that includes lawyers from our regulatory, securities, tax and litigation groups. This mix allows us to provide clients with unclaimed property advice and audit defense legal support, with a nuanced understanding of the day-to-day practices and challenges faced by holders of abandoned property. We regularly counsel both financial institutions (e.g., broker-dealers, banks, mutual fund complexes, insurance companies) and "brick and mortar" companies (consumer products, manufacturing, Silicon Valley) on escheat law compliance. In addition, we have years of experience dealing with the New York Office of Unclaimed Funds and counterpart agencies in other states.
Members of the group have:
- Advised financial institutions, including banks, securities firms, insurance companies and some of the nation's largest payment processors on compliance with all 50 states' abandoned property laws, as well as related issues raised by certain business practices associated with dormant accounts;
- Counseled all types of clients on the emerging trends in state escheat audits and the legal defenses that may come into play;
- Conducted internal investigations of potential abandoned property law violations, in response to "forced audits" by states and their outside auditors, as legal support for a voluntary self-audit pursuant to a VDA (voluntary disclosure agreement) and in the context of whistle-blower claims by a former employee;
- Negotiated settlement agreements, VDAs and confidentiality agreements with states and forced audit firms;
- Counseled on the legal status of a broad range of property types, including an array of emerging financial and electronic products;
- Participated in the design and implementation of customized compliance and remediation procedures;
- Litigated with the State of New York over the outcome of an escheat audit;
- Litigated with the State of Texas over the disposition of unclaimed funds from a nationwide class action settlement; and
- Represented the Securities Industry Association, the American Bankers Association. the Association of Clearinghouse Banks and the Depository Trust Company before the Supreme Court of the United States, as amici curiae, in Delaware v. New York, 507 U.S. 490 (1993), the most important abandoned property case handled by the Supreme Court in recent memory. We also represented a number of financial institutions in discovery proceedings in that case and assisted counsel for Delaware in the Supreme Court by providing guidance on the securities industry escheat compliance issues that were the subject of the litigation.
Sidley Updates
Publications