Unclaimed property issue escalates

The first auditing firm involved in the probes was Verus, based in Waterbury, Conn. Now, according to Sutherland, ACS Unclaimed Property Clearinghouse (UPCH), a Xerox affiliate, and Kelmar, Wakefield, Mass., are being retained by state auditors and insurance departments.

Verus started the probe using a computer program that matched insurance company files with the Social Security Death Master File (DMF).

They were looking to determine whether insurance companies were being more aggressive in using the DMF to determine whether claimants with variable annuities that offered living benefits had died than they were in seeking to find beneficiaries of life insurance policies where the policyholder had died.

The probe was later expanded to include the proceeds of mutual-to-stock conversions, as in the settlement with MetLife.

According to Sutherland, UPCH, formerly known as ACS, has significant unclaimed property experience. UPCH has contracts with more than 40 states and has audited some of the largest companies through several industries, the Sutherland alert said.

Kelmar has conducted audits, largely on behalf of Delaware, for more than 10 years, the alert said.

Of deepest concern, according to Sutherland, is that audits conducted by UPCH and Kelmar sometimes span a period of five to seven years.

"This can leave target companies with audit fatigue and may push them to settle on less than favorable terms," the alert warned.

'UPCH and Kelmar are well-staffed and typically manage several dozen audits simultaneously," the alert said.

"Over the past five years, Verus has concluded or begun audits of approximately 20 companies," the alert said. "But it is not uncommon for Kelmar to initiate 25 to 50 audits at once," the alert cautioned.