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1/20/20 4:13 PM

Four Companies Challenge Delaware Unclaimed Property Program's Use of Contingent-Fee Auditors

by MarketSphere

delawareIn December of 2019, four companies (AT&T Capital Services, Inc., Eaton Corporation, Fruit of the Loom, Inc. and Siemens USA Holdings, Inc.) filed suit in federal district court challenging Delaware’s unclaimed property program. As part of their suits, each company submitted complaints alleging that the use of contingent-fee auditors violates procedural due process because companies are required to submit disputes to a self-interested party.[1]

We have now learned that in a January 10, 2020 federal court filing in the AT&T Capital Services, Inc. et al. case[2], Delaware’s brief included its’ December 31, 2019 contract with Kelmar Associates, LLC, one of the largest third-party unclaimed property audit firms. This new contract states that Kelmar will be paid at fixed hourly rates for general ledger work, while securities-related work remains contingency-based. Previously, Kelmar’s compensation was generally contingent in nature for all work.

It is unclear why Delaware and Kelmar changed the compensation method for general ledger audits, but it may be linked with the increased focus by plaintiffs challenging contingent fee audits.  If this change becomes the norm for states, the holder community will have succeeded in eliminating one of the most divisive issues in general ledger audits, contingency fees.   We will continue to monitor these cases and provide relevant updates.

If you are currently the subject of an audit or need assistance, we encourage you to contact MarketSphere at 844.357.1099 or Contact Us to set up a no cost consultation and learn about options. A professional advisor has the expertise and knowledge to help holders understand the process and navigate the complex challenges of an escheat audit.

[1] Complaint AT&T Capital Services, Inc. et al. v. Geisenberger et al., No. 1:19-cv-02238-MN (D. Del. Dec. 6, 2019); Complaint, Eaton Corporation et al. v. Geisenberger et al., No. 1:19-cv-02269 (D. Del. Dec. 12, 2019); Complaint, Fruit of the Loom, Inc. et al. v. Geisenberger et al., No. 1:19-cv-02273 (D. Del. Dec. 13, 2019); Complaint, Siemens USA Holdings, Inc. v. Geisenberger et al., No. 1:19-cv-02284 (D. Del. Dec. 17, 2019).

[2] AT&T Capital Services, Inc. et al., supra

Topics: Delaware, Compliance, Audit