Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Tales From The Crypt

Horror Stories About The Perils Of Holding Abandoned Property From The Optimizer’s Story Vault… All Of Them Absolutely True.

We’ve been warning readers about the many perils of holding abandoned property since our very second issue of the Optimizer, in 1994…and on a regular basis ever since. Its label aloneis like posting a “steal me” sign. Fraudulent conveyances and outright thefts, come with regularity, year after year –from ones own employees, from ones vendors, if not chosen with particular care, and from a wide variety of outside moles and masqueraders, as the stories below will amply illustrate. And scariest of all, dear readers, if YOU are found guilty of being lax, or remiss in any way – you are at risk for the corporate death penalty.

Most frustrating to us is the fact that three simple things will completely prevent these kinds of horror stories from happening to you. Or, at the very least, they will demonstrate that YOU are not the one at fault if a bad apple does make off with abandoned funds, as ultimately, someone will if they are left lying around. We will save our three simple tips for the end…as the “morals” of our scary little stories. And readers, please note too, that there are a large number of firms represented in this issue that can keep you fully up to snuff here.

DANCING WITH THE STARS…circa1975-80: Harry Evans was a truly wonderful guy, and a wonderful dancer. A former ArthurMurray dance instructor – in fact, an instructor of their instructors – he showed up at all the Corporate Secretary and Corporate Transfer Agent Association events – back when there was always dancing at such events – and he wined, dined and danced his way to fame and fortune as the representative of what was then the largest and best-known firm of professional “heir-finders.” Everyone loved and trusted Harry, and felt that when they turned over the records of their lost shareholders to him, all would be well. Unfortunately for Harry – and for many of his admirers too – David, the heir-finder’s owner’s own heir apparent, was NOT such a good egg. In fact, he had a major drug habit. To finance it, he learned he could very easily “fill in” for the real heirs all by himself. Most of the time he’d simply forge powers of attorney in favor of his Dad’s firm, (Markham, for you history buffs) have them notarized by an accomplice, present them to the transfer agent, collect the funds or shares and convert them to a nice “commission check” for himself… One fine day, the FBI finally came a ‘callin’ and David went directly to jail. Sadly, many of Harry’s best customers had some serious dancing around and ‘splainin’ to do, back at corporate headquarters. And sadly, more than a few of them lost their own jobs in the end.

The next five short stories, all completely true, though with the names disguised, come from the second issue of the Shareholder Service OPTIMIZER – in the Fall 1994 edition.

THE CALIFORNIA CON…ca. 1980: Even though he was one of the lowest paid employees of the State of Californiahe really loved his work. “I love the feeling of power I have,” he mused. “I love calling those big corporations and demanding, ‘Give me the names of your top-ten holders of unclaimed property PRONTO! You’ll be hearing from my office…and getting fined BIG if you don’t comply right now!’ This sure beats banging out license plates,” he chuckled. “And it’s a lot more lucrative. How I’d love to see their expressions if ever they find out I swiped their abandoned property while doing time atthe California State Penitentiary!” How many people fell victim to the legendary “California Con” by sending the names and last known addresses of their biggest lost holders to the P.O. Box of this State of California ‘employee’? No one will ever know for sure, because, forsure, no one will ever tell.

MR. BIGGIE GOES TO TOWN: “Mr.Biggie” was having a very bad day. Here he was, a “Politically Important Gentleman” – or maybe we should pass on that epithet and simply say a former U.S. Congressman, which he was, who’d been hired to settle thee state of a very rich and very prominent former constituent. And some dumbcluck had fouled up BIG TIME! Two of the estate’s largest holdings had beenthe subject of two-tier tender offers…and Biggie’s own back office had failedto update the decedent’s address of record. By the time they woke up, thestock had dropped more than 80% – fora loss of several hundred thousand dollars.The two companies were no helpat all: in fact, they tried to blame HIMand his firm for failing to note that theestate hadn’t been getting checks orother mail for over two years. But Mr.Biggie knew just what to do. He’d ‘go totown’ on those banks that handled the deals! They have plenty of money, and they hate bad publicity. He’d demand full compensation…with interest! He’d expose them in the press! He’d threaten a lawsuit! He’d write his congressman…in fact, he’d pay a visit, and demand legislation! Do you think that Mr. Biggie had his way? Sadly, your editor’s boss back then caved in…and paid what Biggie asked…instead of turning him in to the State Bar Association as your editor-to-be was urging. And Mr.Biggie got the legislation he demanded too…which – ironically – specifically exempted property belonging to decedents– and corporate property too –two of the richest treasure chests of all, please note – from mandatory “search procedures.”

LIFE IS UNFAIR: “A year to live, the doctor said. And here I am...a smart guy like me…stuck in a dead-end job. No money. No future. Not even a girlfriend to hold my hand. Life is really unfair” Joe thought as he prepared the weekly bond redemptions and initialed the check stubs. “But this week will be a lot more fun.” It was laughably easy to punch in a few thousand extra bucks, and type up some extra checks, with the names and amounts drawn from the files marked “Returned by P.O. – Do Not Mail”…and to use the address of the nice looking lady next door, who’d agreed to help him with a series of “very confidential financial transactions.” No one even looked to see if there was a security for every redemption check that needed a signature. And most of the bondholders were already dead and gone, so the money would only end up with the State of New York. A mere drop in the bucket, and it would be mostly squandered anyway, he figured.

MR. BANKERBOTTOM MEETS THE LIQUIDATOR: “How humiliating” Mr. Bankerbottom fumed. “Here I am, a Senior Vice President of a major bank…dealing with THIS? Old Joe, wherever he is, has had the last laugh on me for sure: A fifteen thousand dollar diamond for ‘the girl next door’ appraised at $3,000! A coin collection that brought twenty-cents on the dollar! A 700-pound coffee table! What did he care? It wasn’t his money…and he thought his days were numbered. The $5,000 parrot! That was the worst… until today. What a vocabulary! Totally unsalable…and it still hurts where it bit me. But now…the final indignity…liquidating Joe’s $100,000 library of porn films, all purchased with abandoned property.” Do you think this was the final indignity for Mr. Bankerbottom? It wasn’t; he was fired shortly thereafter for this and other oversights that occurred on his watch…And “old Joe,” when last anyone heard, miraculously recovered…except for the girlfriend, that is, who split as soon as she found out he was cured.

NO GOOD DEED GOES UNPUNISHED: “What are you folks up to down there?” the normally unflappable Chairman of Manny Hanny barked into the phone. “I was on the ninth hole at my club the other day and this lawyer guy charged onto the green, complaining
that someone in our Corporate Trust Department tracked him down, basically accused him of doing a bad job of looking after client assets, sent him reams of unrequested paperwork to fill out – including a gigantic bill, he said, for insurance to replace some lost
bonds. He says we owe his client tens of thousands in interest.” Fortunately for us, and for our then new service to locate “lost holders” and return their property to them, our Chairman well knew two truisms about shareholder relations that are still very well-worth remembering: First, of course, is that no good deed goes totally unpunished… But next, and far more important, is
the truism that “the noise-level – and the threat-level of a shareholder complaint – and the size and nature of the compensation they’re demanding – are directly related to the degree of negligence on the part of the complainer.


“Bankers Trust ‘Trust-Bankers’ Use Abandoned Property to fund their Christmas parties”...a story that broke just as their acquisition by buttoneddown Deutsche Bank hit the streets…

Then, worse yet, “Bankers Trust admits to converting $19.1 million of abandoned funds to income”… and pays an additional $60 million federal fine and a $3.5 million fine or New York State. Meanwhile, BofA settles charges that it diverted State & Muni Bond monies to income; pays $187.5 million, of which the whistleblower, a former VP, gets $22 million. (May/June 1999)

THE OPTIMIZER cites an article by attorney Gerald Tishler “Corporations May be Liable for Releasing Shareholder Lists to Search Firms” warning that a “tracer’s conduct is attributable to the corporation by virtue of the actual or apparent authority which the corporation or its transfer agent grants to the tracer”… and the possibility of lawsuits for “deceptive practices” under the Federal Trade Commission Act…or rulings that the fees were “unconscionable…wholly out of proportion to the reasonable cost of the search performed”…and that “any sharing of tracer fees directly or indirectly with the transfer agent or the issuer raises serious questions concerning the fiduciary obligations of the corporation or its agent to its shareholders.” (January/February 2001)

“Ex-employee shareholders of Intel and Hewlett-Packard sue to recover the difference between the market value of shares sold as “abandoned” without adequate search procedures and the sales-prices that California received upon making the sales…” Where were those Plan Trustees, who could and should have found them with ease, we ask.

“Fortune-50 Company hands over abandoned property records to a ‘finder’ based on the finder’s webpostings boasting ‘hundreds of years of experience’; Finders abscond with the loot.” (Second Q. 2007) Yikes!

“Transfer Agent promises to obtain ‘forgiveness’ from fines and penalties if a client allows them to hand over $20 million in abandoned property without doing any search and recovery efforts.” What the T-A failed to tell its client is that said T-A will get a $1 million+ finder’s fee… while the corporate entity may be liable for shareholder claims that the company breached a duty to them, to track them down. (Second Q. 2010)

“The State of California is in the news again for abandoned property high-jinks…this time for demanding penalties and interest for ‘late filings’ that, after investigation, prove to have no basis at all.” (Second Q. 2010)

So here, dear readers, are three simple things to keep in mind when dealing with so-called abandoned property:

  1. Heed the judge in the landmark Badger v. Tandy case: “A corporation should be cautious in handing around its record of missing stockholders. When a stockholder does not know what shares he owns in what company or the value thereof, the circumstances are ripe for overreaching… A company has an interest in protecting its shareholders from abuse.”
  2. Heed the advice THE OPTIMIZER first offered in 1994, on investigating the track record of would-be vendors. (E-mail cthagberg@aol.com for a copy of the complete article…which is still precisely ‘on the money’)
  3. Most important of all: Heed THE OPTIMIZER’s advice to find lost holders as soon as they become “lost”: Unlike the world of 1994, virtually every single shareholder, or their legal heirs if they are deceased, CAN be located today – with relative ease and efficiency – and reunited with the property that belongs to them. There is simply no need to HAVE a file labeled ‘abandoned property’ in this day and age…much less to turn shareholder assets over to State Agencies!