The Delaware General Assembly has proposed two bills to address important and timely major issues in the state’s unclaimed property laws. Senate Bill 266 provides the state escheator the ability to control whistleblower actions through incentives, while providing consequences to noncompliant holders. Senate Bill 267 defines the designations of foreign property, worthless securities, and early reporting.
Senate Bill 266
This Act removes the ability for persons (“whistleblower”) to bring an action under the Delaware False Claims and Reporting Act (DFCRA) for failures to comply with reporting requirements of the Delaware Unclaimed Property Law (UPL). It leaves untouched the ability of the attorney general to bring such an action after a 90-day period, during which the state escheator may initiate an examination against a holder who is not otherwise engaged in a voluntary disclosure agreement or under examination, compliance review, or verified report review. The Act also defines what payment a whistleblower may receive, in the event the whistleblower provides information concerning the failure of a holder to comply with the UPL’s reporting requirements, and the state receives a payment as a result.
Under the Act, if a whistleblower provides information regarding a holder’s noncompliance with the reporting requirements of Del. Code Ann. tit. 12, § 1142 (Unclaimed Property – Report required by holder), the state escheator may initiate an examination within 90 days of receipt of such information, or the attorney general, as a result of information provided by a whistleblower, may resolve a claim and award to the whistleblower from the total payments to the state by the holder in connection with the resolution:
(1) A minimum of 20% and up to 30% of the first $5 million of such payments.
(2) A minimum of 10% and up to 20% of any portion of such payments exceeding $5 million, if any.
(3) Any costs (including attorneys’ fees) incurred by the whistleblower as may be agreed upon.
This procedure differs from the previously allowed process under the DFCRA in that if the state decides to intervene in a suit filed, the whistleblower is entitled to 15–25% of the recovery, and if the state does not intervene, the whistleblower is entitled to 25–30% of the recovery. The DFCRA also allows the whistleblower to recover reasonable expenses, plus reasonable attorneys’ fees and costs.
Senate Bill 267
This Act clarifies various aspects of the state’s unclaimed property laws, specifically the following:
Section 4 limits the filing of amended reports by holders seeking a refund of property when claims have been filed and paid on the property; when the original report was filed in conjunction with an examination or voluntary disclosure agreement submission; or after three years, when the holder seeks a refund because of an error in a cost of goods sold calculation, as it usually pertains to the reporting of gift card property. This section is not intended to limit holder reimbursement claims, where a holder seeks to claim from the state previously reported property that the holder has since returned to the owner.
Section 6 clarifies and confirms the current practice that holders must pay and deliver property at the same time they file their report.
Section 7 enacts provisions to allow the state to pursue claims in bankruptcy for unclaimed property reported, but not paid to the state, prior to a bankruptcy.
Section 8 clarifies the state’s indemnification obligations and definition of good faith generally and specifically for property reported “early” (before the full dormancy period has run). This section also establishes that the state escheator may enter into written indemnification agreements with holders requesting to report and remit property “early.” The amendment of this section to clarify the state escheator’s complete discretion to grant or deny early escheatment requests under § 1155(b) merely recognizes the unreviewable discretion already provided under that section.
Section 9 clarifies and confirms current practice, allowing the state escheator to decline to take custody of physical property, including savings and bearer bonds, any property that may present a future litigation risk to the state, worthless securities, and virtual currency for which no ready public market exists.
We will keep you updated on the progress of these bills through the legislative process and can work with you in implementing these new rules. If you have any questions on these developments, please reach out to a Ryan team member.
TECHNICAL INFORMATION CONTACTS:
Mark A. Paolillo
Principal
Ryan
857.288.1976
mark.paolillo@ryan.com
Susan Han
Principal
Ryan
442.244.2447
susan.han@ryan.com
Jeff Henshall
Principal
Ryan
404.682.1200
jeff.henshall@ryan.com
Christopher Jensen
Principal
Ryan
469.399.4142
christopher.jensen@ryan.com
Sonja Roman-Molina
Principal
Ryan
954.740.6255
sonja.roman@ryan.com
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