WASHINGTON -- Two congressmen have asked the General Accounting Office to analyze legislation that would overturn a Supreme Court ruling last year that changed the way unclaimed dividends and interest on certain securities are returned to states.
Rep. John Dingell, D-Mich., and Rep. Edward Markey, D-Mass., asked the GAO last week to study the escheatment issues raised by the bill to help them win jurisdiction over the legislation, which was introduced in June 1993 by the House Banking Committee's chairman, Rep. Henry Gonzalez, D-Tex., and its ranking Republican, Rep. Jim Leach of Iowa. Gonzalez and Leach offered the bill after the high court ruled in Delaware v. New York that the unclaimed assets should revert to, or "escheat," to the state in which the financial institution that holds the money is incorporated.
The legislation would set up a system in which the unclaimed assets would escheat to the state where the principal executive officer of the issuer of the underlying Securities is located.
The bill was referred to the Banking Committee but not to the House Energy and Commerce Committee, which Dingell chairs. Markey chairs the energy committee's telecommunications and finance subcommittee.
Delaware strongly opposes the legislation, which would be applied retroactively, because the state could lose a settlement award of up to $200 million that it stands to reap under the court ruling.
The dispute between DelaWare and New York involved dividing up collection of unclaimed dividends and interest held by banks and securities firms earned from municipal bonds and other securities. Delaware sued New York on grounds that it had improperly collected unclaimed funds from Delaware-incorporated brokers that did much of their business in New York.
Other states intervened in the case to try to collect unclaimed properties for themselves. In their July 28 request to the GAO, Dingell and Markey said all states would be affected by the legislation.
After the high court issued its decision in March 1993, New York agreed to pay Delaware $200 million in installments that was taken from firms incorporated in Delaware.
New York has joined Delaware in opposing other intervening states that are backing the proposed legislation. Earlier this year, Gov. Thomas Carper of Delaware said the legislation "would result in inefficiencies and increased bureaucracy for the banking and securities industries nationwide to the detriment of all the states."