After a 14-year battle waged by him and three predecessors, state Treasurer Ron Estes has gotten the federal government to redeem almost $862,000 worth of abandoned U.S. Savings Bonds.
He is gunning for about $151 million more.
If he succeeds, it could bring an additional $3.5 million to $4 million to the state budget each year.
The 1,447 redeemed bonds, some of which date back to World War I, were recovered from abandoned safe-deposit boxes once rented by Kansas residents.
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Until now, the federal government had refused to cash in the bonds without approval from the original owner – probably long deceased – or a legitimate heir, Estes said.
The bonds had reached final maturity and were no longer generating any interest, he said.
They sat in the safe at the treasurer’s office with other unclaimed property, in some cases for decades.
Brett Milbourn, a private lawyer representing the treasurer’s office, said the redemption marks the first time that any state has been able to convince the U.S. Treasury to cash out abandoned bonds.
The treasurer’s office, which has a division devoted to reuniting people with their unclaimed property, has gone beyond the requirements of law to try to track down the bond owners, he said.
In addition to trying to contact the owners through their last known addresses and by maintaining an unclaimed property database on the Internet, the treasurer’s office also advertised in newspapers across the state. The effort found fewer than five of the bond owners, officials said.
The bonds had all gone unclaimed for at least eight years – and in many cases, far longer than that, Estes said. The newest that were redeemed had been purchased in January 1974.
Trying since 2000
The effort to redeem unclaimed bonds began in 2000, when Tim Shallenburger was state treasurer, officials said.
Shallenburger, a former speaker of the Kansas House, shepherded a change in state law to designate the treasurer’s office as the official owner of unclaimed bonds, Estes said.
Efforts to redeem the bonds continued under Treasurers Lynn Jenkins and Dennis McKinney, but the turning point came recently when a Shawnee County court ruled that the state could take title to the bonds in its possession.
The only bonds redeemed so far are those for which the state possessed the actual paper bonds.
Although other bonds are missing, there is still a federal record of who they were sold to and for how much. But Estes said those records indicate there’s an additional $16 billion in matured unclaimed bonds outstanding nationwide – and it’s estimated that $151 million worth of those belong to people whose last address was in Kansas.
In December, the treasurer’s office filed a first-of-its-kind action in the U.S. Court of Federal Claims, appealing the U.S. Treasury’s decision not to allow the state to redeem the missing bonds. A response is expected in February.
If Estes wins, it could bring some substantial money to state coffers.
The treasurer’s office can’t just spend the money. Unclaimed securities are converted to cash that’s held in a special account in case the rightful owner shows up someday, Estes said.
But the state can and does invest the cash, and the investment income is sent to the state’s general fund, he said.
The unclaimed property fund now is at $260 million and generates $7 million to $8 million a year for the state budget, Estes said.
The $151 million in unclaimed bonds would increase that fund by 60 percent, generating an additional $3.5 million to $4 million more a year in interest income for the state, he said.
When Kansas redeemed the bonds it had in its office, the U.S. Treasury required Estes to personally sign each of the 1,447 paper bonds before it would turn loose the money.
Becky Holmquist, an assistant vice president with U.S. Bank, had to watch him do it and then had to stamp, sign and date each bond to notarize his signature.
“We got almost a million dollars, and it took a full day of my time and almost three days of Becky’s time, so you multiply that times 150 – whew,” Estes said.
The lawyers, however, said the federal Treasury probably won’t require a repeat of Estes’ and Holmquist’s signing marathon.
The paper bonds for the $151 million are almost certainly irretrievably lost or destroyed, officials said.
Scott Gates, the treasurer’s chief legal counsel, said it’s more likely the federal Treasury would simply have Estes sign a list of bond numbers to transfer the money to the state.
“Hopefully it will just be a piece of paper, and we won’t have the physical bonds,” he said.