Arkansas auditor finds friendlier court for $160 million U.S. savings bond claim | Arkansas Blog

Tuesday, November 24, 2015

Arkansas auditor finds friendlier court for $160 million U.S. savings bond claim

Posted By on Tue, Nov 24, 2015 at 2:10 PM

AUDITOR LEA: A big win in Washington County.
  • AUDITOR LEA: A big win in Washington County.
You remember the lawsuit in which state Auditor Andrea Lea emulated some other states in an action aimed at capturing a windfall from unclaimed matured U.S. savings bonds not in the state's possession?

The auditor ran into a skeptical judge in Pulaski County, Circuit Judge Alice Gray. Gray said, among others, the state hadn't properly framed the lawsuit. Lea, represented by two out-of-state law firms known for class action work and also the McMath Law Firm, took a voluntary dismissal of the lawsuit in Pulaski County in October after a second ruling by Judge Gray against Lea..

Then they refiled the case in Washington County Circuit Court, altered the lineup of defendants and found friendlier terrain. Judge Beth Storey Bryan ruled Friday in favor of Lea's claim that all U.S. savings bonds unclaimed by owners who were originally listed as Arkansans residents were now the property of the state of Arkansas. Her opinion was filed Monday.

This could be as much as $160 million worth of bonds, though there's a winding road before the state can lay claim to the money. Lea said she wouldn't be surprised if it took 10 years to conclude the issue.

Eighteen states, with Kansas leading the way and Arkansas joining by 2015 legislation, are attempting to lay claim to matured savings bonds issued to people who once lived in the states. These are distinct from the savings bonds found in Arkansas lock boxes and other places that come into the possession of the state auditor. Nobody knows for sure how many such unclaimed bonds can be traced to Arkansas. The Treasury Department won't release specifics, but there are some $17 billion in bonds nationwide and that has led to the $160 million estimate for Arkansas.

The states want that money. The federal government's position is that the bonds should not be taken from its control. At least one federal court ruling has upheld the government, but a Kansas claim in federal claims court so far has overcome federal government dismissal efforts. As a result, the Treasury Department has proposed a regulation to keep savings bonds out of state property recovery schemes. A ruling could be issued at any time. The comment period has closed. 

Judge Gray ruled in mid-August and again in September after further arguments that Lea had not established proof that the state was entitled to ownership of bonds it did not hold. But Judge Bryan held differently after Lea's attorneys provided some of the information Gray had found lacking.  Bryan gave title to the bonds to the state, with the expectation that, if the Treasury refused to redeem the bonds, the state would do as Kansas has done and file in federal claims court for the money.

Lea said she'd already filed a claim with the Treasury Department and it had required names of bond owners, which the state can't supply. The state was directed to a federal website, a practical impossibility for a search. "If Treasury doesn't give us the names, we'll go to claims court," Lea said.

Lea said she knew the odds were long and that Treasury wouldn't give up $17 billion without a fight. She said, too, that she knew the lawsuit was a "shot in the dark." She was approached early in her term by a legislator and a lobbyist working on the issue and said, "Heck yes, let's go for it. What do we have to lose?"

Her contract with lawyers specifies that they work on contingency and would be paid about 25 percent of recoveries on the bonds not in state possession, if any.

After the difficulties in Pulaski, Lea said she instructed attorneys to find some named defendants — people known as owners of unclaimed bonds — and meet other things the judge in Pulaski had required and find another large county in which to file suit. That led them to Washington, home to the listed owners of bonds in the auditor's possession.

The judge noted the Treasury Department made no effort to find owners of matured bonds, some of which  matured decades ago. She said the state of Arkansas does make an effort find owners of property in its custody. And she said the state had taken steps to change law to allow not just custody, but title of unclaimed property to transfer to the state when unclaimed. That made the property subject to claim by the state in a valid judicial proceeding, Lea contended.

Thus, Judge Bryan ruled the state had made a legal claim to matured bonds not in its possession as well as those in its possession. Bonds are presumed unclaimed five years after maturity and owners have two years after that to lay claim, otherwise the proceeds become state property. That means her order covers all unclaimed bonds that matured on or before Oct. 16, 2008.

This case has raised political eyebrows for a good while in part because of the legislation pushed through by Sen. Jake Files along with lobbyist Ruth Whitney. Lea is not using the attorney general's office for representation, which otherwise would have reduced fees possible for participating private lawyers. She originally used three private law firms, including two out-of-state firms with associations with trial lawyer John Goodson, husband of Supreme Court Justice Courtney Goodson. The third firm, the McMath Law Firm, includes a partner, Will Bond, whose sister is married to John Goodson's law partner Mattt Keil.

For the action in Washington County, Cooper & Kirk of Washington, D.C., and Kessler Topaz Meltzer & Check of Pennsylvania continued as Lea's lawyers, but they were joined by W. H. Taylor of Fayetteville. Taylor  was the source of the $50,000 vacation to Italy on John Tyson's yacht reported as a gift Justice Goodson enjoyed. Taylor has done work for the Tyson family.  (We are a small but interconnected state, aren't we?) Lea said the lead lawyers thought that having a local law firm associated made sense, thus McMath in Little Rock and Taylor in Fayetteville.

Tags: , , , , , , , , , , ,

Sign up for the Daily Update email

Comments (10)

Showing 1-10 of 10

Add a comment

Subscribe to this thread:
Showing 1-10 of 10

Add a comment

More by Max Brantley

  • Where's the outrage?

    Am I the only person, apart from federal prosecutors, outraged about the criminal enterprise that inveigled itself into a privileged position as an Arkansas taxpayer-financed human services provider to the tune, today, of $43 million a year?
    • Jun 21, 2018
  • Where's the outrage?

    • Jun 21, 2018
  • Rutledge opponent hits her socializing with corporate interests

    Mike Lee, the Democratic candidate for attorney general, has criticized Attorney General Leslie Rutledge over recent reports of her participation at private meetings where corporate interests make big contributions to a political group she heads for access to state legal officers.
    • Jun 21, 2018
  • More »

Readers also liked…

Most Viewed

  • Proposed child holding site in Arkansas 5 miles from WWII Japanese-American internment camp

    One big difference between Rohwer and today: The parents kept at Rohwer in World War II weren't separated from their children.
  • Baby gorilla born at zoo

    The Little Rock Zoo has a happy announcement: The birth of a healthy baby gorilla. The baby, whose sex has not been determined, was born to Sekani, who came to the zoo in 2004 from Toronto; her baby is her third. The father of the baby is a silverback, Kivu, and he is being "very attentive" to his first child, the zoo reports. Kivu came to the zoo in 2016 from Santa Barbara.
  • LR woman sues Louisville police over failures in rape investigation

    Salisa Luster Harrison, who now lives in Little Rock, Tuesday filed a federal lawsuit in Louisville, Ky., alleging multiple failures by the Louisville police investigating a sexual assault of her more than 10 years ago.

Most Recent Comments

  • Re: TGIF video and open line

    • P.S. Contrast Elvis with Pat Boone, who took the black man's music, sanitized it, gutted…

    • on June 22, 2018
  • Re: TGIF video and open line

    • Mr. Phart. Elvis stole the black man's music because he admired it so much. He…

    • on June 22, 2018
  • Re: TGIF video and open line

    • If my check clears and I get the miracle I paid oral Roberts for I…

    • on June 22, 2018



© 2018 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation