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State's Auction of Safe Deposit Items Raises Questions

May 27, 1999|KATHY M. KRISTOF | TIMES STAFF WRITER

Rare coins, jewelry and keepsakes taken from safe deposit boxes of about 2,000 "lost" Californians will be auctioned today and Friday, but a random check by The Times has raised questions about the adequacy of efforts to find the owners.

In a 24-hour period immediately before the massive sale, The Times was able to find and contact one-quarter of the owners of so-called abandoned property from a sample list of 24 individuals supplied by the state controller's office.

If the sampling is representative, The Times' investigation shows that perhaps hundreds of these owners of so-called abandoned property could be found through routine computer checks. But California law prohibits the controller's office from making such efforts to search for the 6 million individuals--or their heirs--who have $2.4 billion in unclaimed property held by the state.

The controller's office says it's up to financial institutions to find the rightful owners of abandoned safe deposit boxes. For their part, bank representatives say the banks do everything required by law to contact rightful owners.

Meanwhile, on Wednesday, after questions from a Times reporter, state officials pulled two Purple Hearts from the auction and asked the California Legislature to exempt military medals from future auctions.

State law requires banks to hand over the contents of boxes or other bank accounts that are inactive for three years, but the banks are first supposed to make an effort to contact the owners. However, only one of the six individuals reached by The Times said such notification had been received.

Three said they were shocked that their property had been turned over to the state, or escheated, and say there could have been no effort made to notify them because none of them had changed residences in decades. Two of the three said they maintain active checking accounts with the same bank that turned over the contents of their safe deposit boxes as "abandoned" property.

"I thought the jewelry was in my [safe deposit] box," said Alice Rabinovitch, 88, of Beverly Hills when contacted by a reporter about the pending auction of her jewelry Wednesday morning. "I have the key."

The controller's office said its last attempt to contact any of these individuals was by a form letter mailed more than three years ago. To send a follow-up would be a violation of state law, says Julie Bornstein, chief deputy controller of external affairs.

"The law specifically prohibits us from doing that," she said. "To do it would have to be knowingly breaking the law."

"The onus is on the financial institution to contact the individuals--not the state controller's office," said Byron Tucker, a spokesman for state Controller Kathleen Connell. "We are working under the auspices of the law."

California's Code of Civil Procedure sets up a formula delineating who does what with regard to abandoned property. This code says the state may not spend more than $15,000 per year to "inform the public about this [unclaimed property] program in activities already organized by the controller for other purposes."

Until 1992, the controller's office had a search unit that attempted to find property owners. But during the state's financial crises of the early 1990s, the Legislature voted to restrict those efforts.

State law sets up penalties for banks that fail to turn over property to the state in a timely fashion. "Any person who willfully refuses to pay or deliver escheated property to the controller as required under this chapter shall be punished by a fine of not less than $5,000 nor more than $50,000," the code states.

Owners of the items or their heirs have no statute of limitations in filing a claim for the proceeds of the annual auctions, plus accrued interest.

The law's requirements are less onerous when it comes to notifying property owners that their assets are about to be shuttled off to Sacramento.

Here the law says banking and other financial organizations are required to "make reasonable efforts" to notify these customers by mail if "the holder has in its records an address for the apparent owner, which the holder's records do not disclose to be inaccurate."

Bankers mail out numerous notices to "the last known address" that they have for safe deposit box owners before their assets are turned over.

Wells Fargo also searches through its active accounts to see if the property holder has other accounts with the bank, bank spokeswoman Kathy Shilkret said. Aside from checking the bank's own records, there is no attempt made to determine whether the owner of a safe deposit box has moved or died or become disabled before the box is drilled, housed in safekeeping and then taken to the state controller's unclaimed-property division.

Bank of America has similar procedures, according to a bank spokesman. However, he was unable to explain why the safekeeping accounts of two holders of active accounts were declared "abandoned" and turned over to the state.

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