(Adds budget passage in 20th paragraph.)
June 29 (Bloomberg) -- California Controller John Chiang has $20 for Warren Buffett.
There’s also more than $10,000 owed to director Steven Spielberg, part of a $6.1 billion cache of dormant savings accounts, store credits and forsaken royalty payments that has only grown since 2007 when Chiang, a 48-year-old Democrat, took steps to return more unclaimed property to owners.
“It just keeps coming in,” said Hallye Jordan, a spokeswoman for Chiang, who herself has $66.58 in unclaimed dividends she hasn’t gotten around to retrieving.
The boom is a boon for California’s general fund, where the stray cash is deposited and used as a sort of no-interest loan to pay salaries and expenses -- a cushion that has helped keep the state afloat while state politicians wrestled over a $10 billion budget deficit, the largest in the nation. Getting the money to its owners is a challenge for the controller’s office, where as many as 86 staffers work processing claims.
Orphan funds from banks, brokerage firms and other businesses arrived at a rate of $633 million last year, outstripping the $399 million Chiang’s office returned to beneficiaries. He can’t persuade some people to ask for their money -- even Governor Jerry Brown, who never recouped $61 he left in a brokerage account that was closed in 1996. Brown’s spokesman, Evan Westrup, said the governor declined to comment.
Along with Buffett and Spielberg, Brown is among the 13.1 million organizations and individuals whose unclaimed property has been handed over to the state since 1959.
‘News to Him’
Buffett, chairman and chief executive of Berkshire Hathaway Inc., was ranked the second-richest American by Forbes magazine with a net worth of $50 billion, after Microsoft Corp. co- founder Bill Gates. He is owed $20 from an escrow account.
Los Angeles Mayor Antonio Villaraigosa is due $386.33 from escrow and cashier’s checks. Actor Charlie Sheen could collect $1,137.93 from three inactive accounts.
Buffett didn’t respond to a request for comment e-mailed to his assistant, Carrie Kizer. Sarah Hamilton, a spokeswoman for Villaraigosa, had no immediate comment. Sheen’s attorney, Martin Singer, didn’t respond to a request for comment.
Spielberg has a $135 Tiffany & Co. credit, a $206 overpayment to pharmacy benefits manager Medco Health Solutions Inc., and $10,000 in a cashier’s check at Bank of America that he never cashed, according to the state database.
“I would guess it would be news to him and to everybody here,” his spokesman, Marvin Levy, said in an e-mail.
Not all sums are minor. City governments in California are owed $632,934, and counties at least $880,707, according to data compiled by Bloomberg. The controller returned over $2.2 million to local governments last year and has a team working on those accounts, according to Jordan.
Someone named Steven A. Aranoff, who the state has been trying to find, has $1.6 million coming to him.
“Some people are just too wealthy,” Chiang said when asked why more people don’t claim their money. “It’s all relative.”
Every state has a law to prevent businesses from sitting on customers’ funds forever, requiring that a stock certificate that has been ignored or a safety deposit box that hasn’t been paid for be turned over. The time period is typically three years, according to Kevin Johnson, a spokesman for the Lexington, Kentucky-based National Association of Unclaimed Property Administrators. Right now, Johnson said, there is $33 billion in such property across the U.S.
“All states guarantee that if you have a legitimate claim they’ll play it,” Johnson said. “The states use the money in the interim.”
North Carolina uses the interest on its $500 million for college scholarships. Ohio, with $1.4 billion, spends it on low- income housing programs. Proceeds from abandoned property will generate $424 million or 12.6 percent of Delaware’s revenue this year, according to the state Economic and Financial Advisory Council -- making it the largest source of funds after personal income and business franchise taxes.
In New York, which has collected $10.5 billion of unclaimed property since 1942, Governor Andrew Cuomo persuaded the Legislature in April to reduce the amount of time businesses are required to turn over unclaimed funds to three years from five, generating an additional $55 million for the state. Texas Governor Rick Perry signed similar legislation on June 17.
“It’s supposed to be a consumer-protection law,” said Valerie Jundt, a managing director at Keane, a New York-based consulting firm that helps companies comply with unclaimed property regulations. “It becomes dangerous territory when states and legislators are using this to balance their budgets.”
Legislators in California last night passed a budget that relies on $4 billion in extra revenue and additional service cuts to eliminate the $10 billion shortfall.
California had to step up its efforts to return unclaimed property after losing a federal court case in 2007 brought by stockholders who hadn’t been contacted before their shares reverted to the state, according to Robert Peters, managing director of state taxes at the consulting firm Duff & Phelps LLC in Chicago.
The controller sponsored legislation requiring his office to reach out to would-be beneficiaries, and created the position of Property Owner Advocate to further facilitate claims. A website that is searchable by name is updated weekly, according to Jordan. About her own unclaimed property, she said: “I’ll get around to it.”
Chiang sent out 1.39 million notices last year, up from 22,000 in 2000. California recently joined other states, including Florida and Connecticut, in more aggressively pursuing dormant accounts from insurance companies.
Chiang reached a settlement with insurer John Hancock in April, requiring the company to check the names of policy holders each quarter against Social Security Administration death records, and to notify beneficiaries who haven’t claimed payouts. The company agreed to help the controller return $20 million in death benefits or annuities to heirs.
“The agreement sets new industry standards for the complex issues involving abandoned property,” Roy Anderson, a Hancock spokesman, said in an e-mailed statement.
For cash-strapped local governments, remittances are lagging behind budget pressures.
“Generally, it takes months for the state to process and actually remit escheated property back to the district,” said Mark Harris, director of accounts payable at the Los Angeles Unified School District. “They simply tell us that claims are processed on a first-in, first-out basis and that they will process our claims when they can get to them.”
The district is owed about $56,000, according to the data compiled by Bloomberg.
Chiang said his office gets hundreds of thousands of claims a year. “Everyone wants it like that,” he said, snapping his fingers for emphasis.
--With assistance from Alan Ohnsman in Los Angeles, Timothy Mazzella and Andrew Frye in New York and David Mildenberg in Charlotte. Editors: Anne Reifenberg, Anthony Palazzo
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