Agenda. Definitions 3/3/2015. Michigan Chamber Presents. Unclaimed Property Update March 4, Lynn A. Gandhi, Partner Khalilah V.

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1 Michigan Chamber Presents Unclaimed Property Update March 4, 2015 Lynn A. Gandhi, Partner Khalilah V. Spencer, Partner Agenda Emerging Issues in Unclaimed Property Michigan Unclaimed Property Procedural Reforms National Developments 2 Definitions A Holder - A business or governmental entity, wherever organized or domiciled, who is in possession of property belonging to another party Dormancy Period The period of time when owners of property do not take action on their property, such as the failure to cash a check or initiating a transaction on their bank account 3 1

Definitions A Holder - A business or governmental entity, wherever organized or domiciled, who is in possession of property belonging to

2 Emerging Issues Deposits, prepaids, goods received by not invoiced, overpayments, credits Unknown amounts extrapolated from minimal audit findings Foreign owned property 4 Derivative Rights Doctrine In order for the state to protect property, there must be a defined property right for the state to protect Without an actual known owner, or proof positive that an amount is truly owed, there is no right for the state to protect no monies are due to the state 5 Michigan Procedural Reforms PA 148 of 2013 Unclaimed Property Auditing Standards Revised Limits indirect auditing Requires any examination of records to be performed in accordance with generally accepted auditing standards Findings cannot be based on an estimate 6 2

positive that an amount is truly owed, there is no right for the state to protect no monies are due to the state 5 Michigan Procedural Reforms PA 148 of 2013 Unclaimed Property

3 New Auditing Standards Permits the use of a reasonable method of estimation only if a Holder does not have substantially complete records Substantially complete records defined as at least 90% of the records necessary under principles of internal controls 7 Substantially Complete Records The 90% rule is not a strict requirement - looks to the materiality value of the records Each particular property class is to be valued separately Not an absolute measurement of all available records 8 Proposed Rules PA 148 also required the Department to: Provide the Holder a complete copy of the audit report; and Initiate rules on audit standards Hearing held on proposed rules on February 27, 2015; the Chamber submitted detailed comments and revisions 9 3

records Each particular property class is to be valued separately Not an absolute measurement of all available records 8 Proposed Rules PA 148 also required the Department to: Provide the

4 Appeals Process Public Act 423 of 2014 Added new section 31a to the UUPA Provides for a request for reconsideration from a notice of examination determination (claim of amounts due) Provides for an internal appeal prior to the filing of a court action 10 Request for Reconsideration Request shall be made in writing Identify the contested property Reasons for contesting Holders still maintain the ability to withdraw a request at any time and file an action in circuit court 11 Request for Reconsideration Deliver property that is not contested Have 60 days from request filing to provide additional documentation Within 60 days, Administrator shall mail a written decision regarding the reconsideration Shall provide reasons and authority 12 4

contesting Holders still maintain the ability to withdraw a request at any time and file an action in circuit court 11 Request for Reconsideration Deliver property that is not contested

5 Appeal Within 90 days of decision, Holder may file in circuit court or file an appeal Holders maintain the right to withdraw an appeal and file in circuit court Appeal hearing is conducted by a neutral delegate, with required experience in the area of unclaimed property 13 Filing of an Appeal Request must be in writing Indicate reasons why the decision on reconsideration was in error Hearing set within 90 days of filing of appeal, with at least 21 days of notice Audio recording may be made 14 Decision on Appeal Written recommendation issued by the delegate to the Administrator within 90 days of hearing or submission of additional documentation Written recommendation shall provide reasons and authority for decision Within 60 days, the Administrator shall affirm, modify or reject the decision 15 5

Hearing set within 90 days of filing of appeal, with at least 21 days of notice Audio recording may be made 14 Decision on Appeal Written recommendation issued by the delegate to the Administrator

6 Appeal of Appeal Within 90 days of mailing of Administrator s action, Holder may file an action in circuit court Circuit court action is de novo 16 National Developments Recent Court Cases Settlement of Select Medical Temple-Inland hearing Osram Sylvania filing 17 Select Medical Settlement required that terms of settlement are public information Insisted upon by Plaintiff - to educate other Holders of resolution on the issues 18 6

Medical Temple-Inland hearing Osram Sylvania filing 17 Select Medical Settlement required that terms of

7 Temple-Inland Hearing at U.S. District Court for the District of Delaware, seeking declaratory judgment and injunctive relief: Honorable Sue L. Robinson: I was astounded that an audit could go back decades and without any historical records come up with an estimate. Quite frankly, I found that astounding, if not shocking. 19 Temple-Inland My concern is, number one, whether that really is a deprivation of property without due process; Whether this process has really been run by a body that is interested in due process and fair play. 20 Osram Sylvania Challenges Kelmar audit methodologies Alleges violations of federal law by estimating the existence of unclaimed property by the use of extrapolation, rather than actual identification of obligations to any actual creditor 21 7

19 Temple-Inland My concern is, number one, whether that really is a deprivation of property without due process; Whether this process has really been run by a body that is interested in due

8 Delaware VDA Program Technically closed for new applications Consider informal outreach Secretary of State using Delaware law firm to administer Very reasonable 22 Revision of UUPA Lead by Uniform Law Commission (ULC) Drafting committee appointed Input solicited from interested parties Current timetable draft of revised Act set for July 2015; second reading after revisions set for summer Hot Topics Proactive measures on acquisitions and dispositions Audits of VDA periods (pre current VDA programs) Asset recovery Fee finders 24 8

interested parties Current timetable draft of revised Act set for July 2015; second reading after revisions set for summer 2016 23 Hot

9 Thank You Lynn A. Gandhi Honigman 660 Woodward Ave Detroit, MI Khalilah V. Spencer Honigman 660 Woodward Ave Detroit, MI

lgandhi@honigman.com 313.465.7646 Khalilah V.

Voluntary Disclosure Agreement (VDA) Developments

ABANDONED AND UNCLAIMED PROPERTY Issue 2, Volume 4 December 2014 Voluntary Disclosure Agreement (VDA) Developments New Developments in Arkansas and Puerto Rico Voluntary Disclosure Agreements (VDAs) remain