KeepUP™ Blog

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations and continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received on September 24, 2019 from the office of Delaware’s Secretary of State, the latest round of VDA invitations have recently been mailed to a number of Delaware incorporated companies.  Targeted companies now include middle market companies with annual revenues of $50M and above. Click here to see a sample correspondence from September 2019.   

The correspondence notes: 

Pursuant to 12 Del. C. §1173(b), the Delaware Secretary of State (SOS) recently sent out letters inviting companies to enter the Voluntary Disclosure Agreement (VDA) Program. Any company that receives a letter is encouraged to enroll in the SOS VDA Program to facilitate compliance with Delaware’s Abandoned or Unclaimed Property Law.

Invitees have 60 days from the date of the invitation to enroll in the SOS VDA Program by completing, executing and submitting Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply to the Secretary of State.  If an invitee does not enroll in the SOS VDA Program within 60 days of the invitation mailing, the company will be referred to the State Escheator for examination.

Pursuant to 12 Del. C. § 1172(a), the State of Delaware cannot initiate a new abandoned or unclaimed property examination unless the company has first been notified in writing by the Secretary of State (SOS) that it may enter into the DE VDA program.  The VDA program allows a company to come into compliance by utilizing the DE VDA guidelines to conduct a self-audit of their books and records.

Since the latter part of 2018, Delaware’s SOS has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. The SOS correspondence notes that recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance (DOF), which would then have the option to commence an unclaimed property audit.  

What Should A Company Do If It Receives Correspondence From Delaware?

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. 

Based on correspondence that MarketSphere has received on May 20, 2019 from the office of Delaware’s Secretary of State, the latest round of VDA invitations will be mailed to a number of Delaware incorporated companies in the very near future.    

The correspondence notes: 

Pursuant to 12 Del. C. §1173(b), the Delaware Secretary of State (SOS) soon will distribute letters inviting companies to enter the Voluntary Disclosure Agreement (VDA) Program. Any company that receives a letter is encouraged to enroll in the SOS VDA Program to facilitate compliance with Delaware’s Abandoned or Unclaimed Property Law.

Invitees have 60 days from the date of the invitation to enroll in the SOS VDA Program by completing, executing and submitting Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply to the Secretary of State.  If an invitee does not enroll in the SOS VDA Program within 60 days of the invitation mailing, the company will be referred to the State Escheator for examination.

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations, and our information is that Delaware intends to continue this practice on an on-going basis.

The latest round of VDA invitations were mailed to a significant number of Delaware incorporated companies on February 15, 2019. Recipient companies had to respond to these notices within 60 days (i.e., by April 15), or they would be referred to the Delaware Department of Finance, which would then have the option to commence an unclaimed property audit.

As the deadline has now passed, notified companies that failed to respond can no longer enter the VDA program. Based on recent history, we would now expect all companies that did not enter the VDA program to receive an audit notice in the very near future.

MarketSphere Unclaimed Property Specialists has learned that the State of Delaware began sending out a significant number of unclaimed property audit notices in early January 2019.

Pursuant to 12 Del. C. § 1172(a), the State of Delaware cannot initiate a new abandoned or unclaimed property examination unless the company has first been notified in writing by the Secretary of State that it may enter the Delaware VDA program. 

As we advised in our December blog entitled “Delaware Unclaimed Property Notice Letter”, Delaware had been busy filling companies’ mailboxes with Voluntary Disclosure Agreement (“VDA”) program invitations. Companies had 60 days to respond to the invitation or be referred to the Department of Finance for audit.  Following up on these invitations, the State has now begun mailing unclaimed property audit notices to companies that did not respond timely to these invitations. 

MarketSphere has been made aware that holders may be receiving notices from the State of Delaware.  The following is a recent posting to the Unclaimed Property Professionals Organization (UPPO) website concerning these notices detailing interaction with the Delaware State Escheator. 

UPPO recently received reports that Delaware unclaimed property staff has notified some holders that they are required to submit a copy of their policies and procedures as part of their annual filing. In response, UPPO reached out to Delaware State Escheator Brenda Mayrack, requesting clarification. Following is her response:

In December 2018, Univar, Inc. filed an action in U.S. District Court asking the Court to stop an existing unclaimed property audit being conducted by Kelmar Associates, LLC.  In their complaint, Univar seeks a declaratory judgement that the audit violates several matters, including Delaware’s Escheat law, federal common law and certain clauses of the U.S. Constitution.

 In December 2015, Delaware issued an audit notice to Univar, indicating that the audit would be conducted by Kelmar as the state’s agent. Univar disputed the legitimacy of the audit including calling into question Kelmar’s audit protocols. On October 30, 2018, Delaware issued a subpoena to Univar requiring Univar respond to Kelmar’s document requests, which Univar had not responded to. In response to the subpoena, Univar filed this complaint to stop the audit. Among other matters, the complaint alleges:

Delaware has been busy filling the mailboxes of companies recently with Voluntary Disclosure Agreement (VDA) program invitations.  If you are a recipient of any letter from Delaware, pay particular attention to the letter content. 

Pursuant to 12 Del. C. § 1172(a), the State of Delaware cannot initiate a new abandoned or unclaimed property examination unless the company has first been notified in writing by the Secretary of State that it may enter the Delaware VDA program.  The VDA program allows a company to come into compliance by utilizing the Delaware VDA guidelines to conduct a self-audit of their books and records. 

This is an excerpt which will help in identifying the Delaware VDA program invitation:

On September 21, 2018, a Delaware jury found Overstock.com guilty of failing to report and remit nearly $3M in unredeemed gift card balances that should have been reported to the State of Delaware as unclaimed property.
The verdict is the latest in a series of on-going cases that has already resulted in the payment to Delaware of over $25 million in unpaid gift cards and penalties from other retail card issuers who settled before trial.

Under Delaware law, gift card issuers are required to turn over unredeemed gift card balances to the state after a period of 5 years.  However, this and other lawsuits has exposed a common practice in the gift card industry, where significant numbers of cards go unredeemed and issuers keep these balances.

In the Overstock case (The State of Delaware ex. rel. William Sean French v. Overstock.com, Inc. [Superior Court of Delaware C.A. No. N13C-06-289 PRW CCLD]), the defendant declared that it had transferred unredeemed gift card balances to an Ohio-based business, CardFact Ltd (now known as Card Compliant).  As Ohio does not require the escheatment of unused gift card balances, this transfer allowed CardFact and Overstock to keep these balances.

On May 14^th, the Supreme Court legalized sports betting, overturning a 1992 federal law which barred most states from permitting sports gambling. As a consequence of the decision, each state will be allowed to introduce and pass legislation for sports betting within its jurisdiction. Almost twenty states, as shown in the map below, have already enacted legislation or introduced bills to legalize sports wagering [1].

Note - Oregon, Delaware and Rhode Island appear to be readying for sports betting through their lotteries [1]. 

Considering the success of online companies who specialize in fantasy sports contests, we anticipate the legalization of sports betting to only spur the industry as a whole, while also generating a new source of revenue for states.