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Louisiana joins 21-state suit against Delaware for $150 million in unclaimed checks

By Kerry Goff | Jun 26, 2016

BATON ROUGE – Attorneys general from 21 states, including Louisiana, are suing Delaware, claiming that the state has wrongly held onto at least $150 million in uncashed Moneygram checks that should be going to other states.

Typically suits are filed with lower courts and work their way up to the nation's highest court, but suits between state governments can be directly filed in the Supreme Court. In this case, the states filed with the Supreme Court on June 9.

Money orders, travelers' checks and cashier checks must be paid before the check is issued. When those checks are never collected or cashed by the recipient, the value of the check is considered an unclaimed fund.

The suit says that Delaware is wrongly forcing financial services firms that are incorporated in the state to turn abandoned and unclaimed “official checks” sold by MoneyGram, a money transfer service company that operates in all 50 states and internationally, over to the state. 

The suit claims that there is a 42-year-old federal law that requires unclaimed funds go to the state where the check was purchased, not to the financial firm's corporate home state. 

“Delaware wrongfully holds roughly $2 million that belong to Louisiana’s taxpayers,” New Orleans Attorney General Jeff Landry said. “I will work with my colleagues to ensure this money is properly returned.”

Texas and Arkansas are taking the lead in the case, but Landry is joining in, along with attorneys general from Alabama, Arizona, Colorado, Florida, Idaho, Indiana, Kansas, Kentucky, Michigan, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Carolina, Utah and West Virginia.

Landry joined Arkansas Attorney General Leslie Rutledge and Texas Attorney General Ken Paxton, along with the other 18 states. At a minimum, the suit alleges that Delaware has approximately $200 million that rightfully belongs to other states under the federal Disposition of Abandoned Money Orders and Traveler’s Checks Act. The final dollar figure may actually be much higher.

"This practice not only violates federal law, but it's wrong and unfair," Texas Attorney General Ken Paxton, who announced the suit in front of the U.S. Supreme Court, said. "The bottom line is simple: Delaware is ignoring federal law for financial gain."

The plaintiff states are asking the Supreme Court to declare that they, and not Delaware, are entitled to the hundreds of millions of dollars turned over to Delaware, and to all future similar abandoned and unclaimed property. They are also asking the court to order the appropriate repayment to plaintiff states by Delaware.

The suit stems from an independent audit earlier this year that examined a series of abandoned “official checks” from MoneyGram in a select group of states and concluded that nearly $200 million was owed to those states.

The suit alleges both Delaware and MoneyGram routinely ignored the law. An audit commissioned by the group of states alleges that MoneyGram is also at fault, as they went against what is required by law by rendering the unclaimed checks to Delaware.

Delaware, on the other hand, wonders why these states did not intervene in previous suits other states have brought against it, and one already brought to the U.S. Supreme Court.

“This issue has been the subject of two prior lawsuits, filed by Pennsylvania and Wisconsin, against Delaware in federal district courts earlier this year," Thomas Cook, Delaware's secretary of Finance, said in a statement. "Delaware disputes the allegations in those suits and, to bring some clarity to this issue, filed an action in the U.S. Supreme Court last week to resolve the outstanding legal question."

Pennsylvania and Wisconsin are not among the 21 states in the current suit.

 “This is a dispute among states over which state has the priority to property escheated to the State of Delaware in good faith by MoneyGram," MoneyGram said in a statement. "MoneyGram will comply with the decision made by the U.S. Supreme Court.”

Louisiana could be owed up to $2 million if the states win the suit.  

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