Possible roadblock to Kansas’ recovering $151 million in unclaimed bonds

A federal court ruling handed down Monday could complicate Kansas’ efforts to collect unclaimed savings bonds from the federal government.

U.S. District Judge Christopher R. Cooper rejected a lawsuit filed by Kansas State Treasurer Ron Estes that argued the state had a right to claim ownership to savings bonds it deemed abandoned – in many cases because the original bond holder had died without a will or legal heir.

The state said it was exploring options to appeal. “The Obama administration consistently oversteps the authority given to them by Congress and the U.S. Constitution. ... They changed an administrative rule regarding unclaimed bonds in a sneaky attempt to circumvent our original litigation intended to recover all the U.S. savings bonds owned by Kansans,” Estes said in a statement.

In 2013, the U.S. Treasury Department agreed to pay Kansas $876,836 for savings bonds that the state treasurer’s office had in its possession. But it refused to pay the state for $151 million in bonds that were not in the state’s possession.

Estes sued the Treasury Department in federal claims court in 2015.

That case remains pending, and Estes said in an interview Monday night that he expects it to go on for several years. Estes said the goal is to reunite the money with its rightful heirs. However, after a year, the money would be swept into the state’s general fund unless a rightful heir comes forward.

Later in 2015, the Treasury Department adopted rules that required states to have bonds in their possession and sufficient evidence of their abandonment in order to claim them as property.

Estes then sued Treasury in March in U.S. District Court in an effort to block the new rules and recover the money. The state treasurers of South Dakota, Louisiana, Mississippi and Kentucky joined him as plaintiffs. The judge sided with Treasury on Monday.

The Treasury Department did not immediately reply to a request for comment.

Estes said Monday night that the state’s attorneys are weighing whether to appeal the district court ruling. He said it would not necessarily have an impact on the state’s other case and is more likely to have an impact for future cases if the district court ruling stands.

“Our secondary lawsuit was intended to make sure there aren’t any hiccups on our primary lawsuit,” Estes said.

Estes is exploring a run to replace U.S. Rep. Mike Pompeo in the 4th Congressional District after Pompeo was tapped to lead the Central Intelligence Agency in President-elect Trump’s administration.

This story was originally published November 28, 2016 at 4:57 PM with the headline "Possible roadblock to Kansas’ recovering $151 million in unclaimed bonds."