News: CJ Exclusives

State Sues Company Helping Residents Recover Unclaimed Property

AG, treasurer claims Equity Solutions charges illegal fees

Attorney General Roy Cooper and state Treasurer Janet Cowell have sued Bruce Cohen, a Cary man who runs a company that helps people recover unclaimed property from the state Escheat Fund. The lawsuit claims Cohen and others in the company submitted false documents to collect fees from clients reaching as high as 85 percent of the property owner’s assets.

The lawsuit was filed Aug. 13 in Wake County Superior Court against Equity Solutions of the Carolinas, three of its officers, and Cohen’s wife. It accuses the employees — President Dein Spriggs, Vice President Cohen, account executive Leo Liberto and Cohen’s wife Maria – of racketeering by attempting to obtain property under false pretenses.

According to the lawsuit, Equity Solutions charged clients fees of more than 30 percent to recover their property, even though the General Assembly last year capped fees from recovery firms at 20 percent of the proceeds or $1,000, whichever is less.

Cohen instead says the lawsuit is intended to maintain balances in the state’s Escheat Fund, which is made up of unclaimed property such as bank accounts, utility deposits, and money left over from land sold for unpaid taxes.

The fund was valued at about $470 million in June. Individuals are entitled to recover their property at any time, but lawmakers use accumulated money in the fund to cover financial aid costs for low- and middle-income residents attending college in North Carolina.

The suit seeks to both cancel contracts Equity Solutions has made and forfeit all property used by the company, including the Cohen family home in Cary, which is appraised at more than $584,000. Cooper also wants the property owners to receive refunds and for Equity Solutions to be banned from doing business in North Carolina.

“Companies that ignore the law harm both consumers and businesses that are doing things the right way,” Cooper said. “We want to make sure there’s an even playing field for North Carolina consumers and businesses.”

David Batten, the attorney for Equity Solutions, said he plans to defend the case vigorously.

“We feel strongly that our clients were acting in the bounds of the law on this,” Batten said. “We feel that they helped a lot of citizens of this state recover money that was rightfully theirs.”

Equity Solutions told its customers that the company would pay the costs to obtain the unclaimed property.

The attorney general’s office contacted Equity Solutions in June and asked it not to enter into any new contracts with consumers or file any new documents in county courts seeking to recover money left over from land that was sold for unpaid taxes. But Equity Solutions responded that the company planned to continue operating as before, according to the attorney general’s office.

Bruce Cohen said the state sued him to try to keep money in the Escheat Fund. The state accumulates about $100 million in unclaimed property a year and pays out about $39 million in claims. State law places no limit on how long people have to reclaim their property.

Equity Solutions had sought a ruling from the treasurer’s office about whether a new law limiting fees applied to agreements that Equity Solutions had previously negotiated over the funds remaining from real estate sold for unpaid taxes.

“I am the poster boy for recovering funds for people who don’t know how to do this,” Cohen said. “I haven’t slept. I can’t believe they did this. It’s a political situation, and it’s horrible. It’s all about politics.”

Cohen said the company helps people recover their own property — money they are entitled to receive and that they are unaware is available to them. He also said the property often isn’t listed on the website the state maintains for the Escheat Fund.

Heather Franco, a spokeswoman for Cowell, said the department doesn’t comment on pending lawsuits.

A law passed last year by the General Assembly imposes a $1,000 cap on fees companies can charge to help recover unclaimed property from the state. The lawsuit lists five contracts Equity Solutions entered into after the law took effect in October 2009.

Linda Hofmann, of Pickens, S.C., signed a contract with Equity Solutions in March agreeing to pay 33 1/3 percent of all funds recovered from money left over after a relative’s land in Avery County was sold for back taxes. The company filed paperwork with the Avery County Clerk of Superior Court to recover the money. Hofmann actually received 60 percent of the funds, or about $11,897, after Equity Solutions deducted expenses. She questioned the expenses and was sent an additional check for about $1,308.

The lawsuit accuses Equity Solutions of depriving Hofmann
of her lawful share of the recovery and getting property from the Avery County Clerk of Superior Court by false pretenses.

Another client who dealt with Equity Solutions after the cap was imposed is Margaret Hogan, who received about $4,353 from the proceeds remaining after a relative’s land was sold for back taxes. Nine payments to other relatives also were made. Equity Solutions retained 43 percent, or about $26,000, for fees and expenses.

Hogan, who used the money to buy a gravestone for her mother, said she thought the fees and expenses were reasonable. The expenses often include legal fees, travel, and genealogical research.

“I don’t think they would be able to do business without charging like that,” Hogan said.

Sarah Okeson is a contributor to Carolina Journal.