- Associated Press - Tuesday, March 1, 2016

DOVER, Del. (AP) - Pennsylvania’s state treasurer has filed a federal lawsuit challenging Delaware’s claim to more than $10 million in abandoned property.

The lawsuit seeks to recover $10.3 million remitted to Delaware’s state escheator from 2000 to 2009 by MoneyGram Payment Services Inc. The escheator handles unclaimed property.

Dallas-based payment services provider MoneyGram is also named as a defendant in the suit, which was filed Friday in the middle district of Pennsylvania.

Pennsylvania Treasurer Timothy Reese argues that when a money order is not cashed after a specified time period, any associated funds must be remitted to the state where the money order was purchased. MoneyGram has been submitting unclaimed money to Delaware, where it is incorporated.

“Federal law prevents Delaware from collecting money associated with unclaimed money orders that belong to Pennsylvania and the other states,” Reese said in a prepared statement Tuesday. “Put simply, unclaimed property from Pennsylvania should stay in Pennsylvania.”



According to the lawsuit, the $10 million represents the value paid for official checks issued in Pennsylvania but never cashed. The lawsuit asserts that the last known address of the owner of the official checks is presumed to be Pennsylvania.

Pennsylvania’s filing comes as several other lawsuits challenging Delaware’s abandoned property practices are pending in federal court in Delaware.

“The department is not going to comment on the merits of Pennsylvania’s claims at this time,” Delaware finance Secretary Tom Cook said in an emailed statement.

Michelle Buckalew, a MoneyGram spokeswoman, said the dispute is between Delaware and Pennsylvania and the company will comply with the appropriate court’s decision.

Abandoned property can include unclaimed stocks and bonds, insurance policies, uncashed checks, unclaimed wages, dividends, even unredeemed rebates and gift certificates. Under federal law, a state can take such property if it remains unclaimed for a certain number of years and the true owner can’t be found.

Abandoned property is the third-largest source of general fund revenue for Delaware, expected to total more than half a billion dollars in the current fiscal year. The huge amount stems from Delaware’s status as the legal home to more than 1 million business entities, including more than half of all publicly traded companies in the United States and about two-thirds of the Fortune 500. The state has a business-friendly general corporation law.

Under U.S. Supreme Court rulings, states follow a two-tier priority scheme for reporting and claiming abandoned property.

Under the primary priority rule, unclaimed property is reported to the state of the owner’s last known address appearing on a company’s records. But if the owner’s address is unknown or incomplete, the unclaimed property is reported to the company’s state of incorporation.

Because so many corporations are formed in Delaware, the state benefits significantly from the second-priority rule.

Delaware has been criticized, however, for the way it aggressively targets abandoned property, reaching back several years into companies’ records to search for it and using estimates to calculate what it is owed when documentation is lacking.

In an effort to address the criticism, state officials formed a task force to examine the program. Lawmakers passed legislation last year based on the panel’s recommendations, codifying a voluntary disclosure program that corporations can join to avoid audits that, in the past, have sought records dating to 1981. The legislation also requires Delaware to invite a company to participate in the voluntary disclosure program before initiating an audit. It also shortens the “look-back” period for audits.

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