Unclaimed Property Laws and State False Claims Acts: The Qui Tam Suits Are Coming

The company, Total Asset Recovery Services, Inc., a Michigan "asset recovery" company, appears to have found a valuable niche in state False Claims Act matters:  it has brought qui tam suits under the Illinois and Minnesota False Claims Acts against MetLife, Inc. and Prudential Life Insurance Co. for allegedly failing to turn over unclaimed life insurance funds.  In the Illinois case which was filed in January of this year, Total Asset alleges that these two companies failed to turn over the proceeds from 4,766 unclaimed life insurance policies.  In the Minnesota suit which was filed last month, Total Asset alleges that these same two companies failed to turn over the proceeds from 600 Minnesota unclaimed life insurance policies.  The Minnesota Attorney General declined to intervene but is reported to be investigating according to the Minnesota Star Tribune.

The attorney for Total Asset Recovery in the Minnesota suit is former Southern District of Florida U.S. Attorney Jeffrey Sloman, who has been in private practice for the last three years after a distinguished career as a federal prosecutor.  Sloman is quoted by the Minnesota Star Tribune as saying that the "the magnitude of the life insurance fraud committed on the states is in the billions of dollars . . . the numbers are mind-boggling."

I predict that in the next five years we will see an exponential increase in qui tam suits alleging that business are failing to pay the state unclaimed property.  From my own experience in advising clients about state unclaimed property laws, most businesses, especially retailers and any business that issues gift cards, are simply unaware of the incredible breadth and application of these unclaimed property laws.  Moreover, such laws are frequently written in such a way as to prevent businesses from avoiding their scope.  Though the downturn in the economy has made some states more aggressive in enforcing unclaimed property obligations, most states simply do not have the enforcement resources available to them to promote wide scale compliance and businesses have not had much to worry about.  With the plaintiffs' bar beginning to realize how profitable such qui tam suits can be for unclaimed property claims, lack of resources to enforce these statutes will no longer be a problem.  Businesses would do well to prepare.

For a resource on unclaimed property, see attorney Mike Rato's blog, Escheatable:  The Unclaimed Property Law Blog

A. Brian Albritton
April 19, 2012