Keane's Unclaimed Property Blog

Delaware Faces New Lawsuit Related to Unclaimed Property Audits

On December 9, 2019, AT&T filed a lawsuit against the state in Delaware federal court, AT&T v. Geisenberger[1], alleging that certain document requests issued by Kelmar, acting as the state’s third party contingent fee auditor, made in connection with an unclaimed property audit that began in 2012, violate the company’s Fourth, Fifth and Fourteenth Amendment rights.  Below is a summary of the Complaint – many of the allegations made by AT&T call to mind the constitutional arguments made in Univar[2], currently pending in the same court.

AT&T maintains that it has complied with multiple requests for documents pursuant to the audit.   In 2018, Kelmar requested additional records, dating back to 1992, related to disbursement checks for 34 affiliate entities and 28 accounts, which included check information for addresses in all states.   According to AT&T, the research and remediation efforts required to comply with such a request would take approximately 23.6 years and involve 60 million transactions.  AT&T objected to the request and offered an alternative approach, which was rejected by Kelmar.  AT&T claims that Kelmar failed to respond to objections made by AT&T regarding the scope of the request and to correspondence from AT&T that sufficient records had previously been provided to test AT&Ts data.

In December 2017 AT&T was accepted into the state’s expedited audit program, under which the state agrees to waive interest if a holder complies with the terms of the audit within the prescribed 2-year period.  AT&T asserts that it was removed from the program on October 31, 2019 because of the above- cited objections to the scope of Kelmar’s requests and argues that this action violated its due process rights, in that the removal from the expedited program eliminated AT&T’s opportunity to receive a waiver of any interest on past-due property without an opportunity to be heard – in an administrative proceeding or otherwise.

On November 8, 2019, Delaware issued a subpoena for the same records, which date back to 1992.  The State Escheator, however, was not afforded subpoena power until 2017, when the unclaimed property law was amended.  Similarly, Delaware law contained neither a record retention requirement nor a look back period until those same 2017 amendments.  As a result, AT&T did not retain, and was not required to retain, records for many of the years in question.  AT&T argues that the retroactive application of the subpoena and of the 2017 amendment also violates it due process rights.

In additional arguments similar in nature to the claims brought by Univar, AT&T also maintains that the estimation methodology utilized by Kelmar subjects it to multiplied liability for the same property, and that confidential and proprietary records could be exposed due to the conflicting public disclosure laws in the various states participating in the audit.  AT&T further claims that Kelmar has unfairly targeted the company for audit due to its size and status and that the selection for audit was not based on neutral criteria.  By selecting audit targets in this manner and applying the particular estimation methodology used by Kelmar, a contingent fee auditor, AT&T argues that the state, and Kelmar, by extension, are guaranteed a significant financial award.

[1] AT&T Capital Services Inc. et al v. Richard Geisenberger et al, Case No. 1:19-cv-02238-UNA.
[2] Univar, Inc. v. Geisenberger, et al, Case No. 1:18-cv-01909-UNA.

Escheat Audits, Litigation, Unclaimed Property Audit

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