Failure to Escheat

Banks and other companies in the financial sector are required to turn over (or escheat) unclaimed property to the state if it has remained unclaimed for a certain period of time (depending on state law).  For example, credit card companies may be required to turn over to the state credit balances owed to their customers if the customers request their funds in a specified time period.  Misrepresenting the existence of unclaimed property to the government may constitute a false claim violating the FCA.

Example

In 2006, a qui tam action was brought against Pacific Bell Telephone Co. alleging that the telecommunications company violated the False Claims Act. Allegedly, the company failed to escheat balances on prepaid telephone cards to the state of California.

In 1998, Bank of America settled a case with the State of California in which a California False Claims Act relator alleged that the bank, in its role in the issuing of bonds, had failed to return unclaimed debt service funds.  The settlement, which also involved overcharging for investment services, settled for a total $187.5 million, $61.9 million of which was earmarked for the State of California.  Local government agencies also had claims involved in the litigation and settlement.