Illinois' state treasurer has accused the city of Chicago of holding potentially millions of dollars worth of unclaimed checks, refunds and other personal property belonging to current and former Illinoisans, and says the city is illegally refusing to turn that property over to the state so it can be returned to the proper owners.
On Feb. 6, Illinois Treasurer Michael Frerichs, through Illinois Attorney General Kwame Raoul, filed suit in Cook County Circuit Court against the city, seeking a court order forcing City Hall to turn over all so-called "unclaimed property" to the Treasurer's office, as the state officials argue is required by law.
The lawsuit centers on a dispute between the city and Frerichs' office over the city's obligations under state law to transmit the "unclaimed property" to the Treasurer's office.
The lawsuit alleges that "despite repeated demands" by Frerichs' office, "the City has refused to comply" with the state law known informally as the Unclaimed Property Act.
The law generally directs that the holders of "unclaimed property" - typically checks for which the payee cannot be located, such as final paychecks from employers or refunds from insurance companies or governmental agencies - must report the existence and nature of the property to the state and hand it over to the Treasurer's office.
The Treasurer is allowed to invest unclaimed funds.
However, the Treasurer's office is also required by law to take steps to reunite the money or other property with its rightful owners.
Currently, Frerichs' office lists those unclaimed properties on a searchable website, which the Treasurer's office frequently advertises. Members of the public are able to freely search the site for any potential property and submit claims for its return.
Frerichs' office also "locates and automatically pays hundreds of thousands of owners their property without requiring them to file a claim by matching data with the Illinois Department of Revenue and the Illinois State Board of Elections" through the so-called Enhanced Money Match program.
"We work hard to return missing money and unclaimed property,” Frerichs said in a statement. “In my time as state treasurer, the attorney general has represented me in court fights with life insurance companies and businesses that issue rebate checks. When folks do not follow Illinois’ unclaimed property law, we have worked with the Attorney General to enforce the law. I take my legal duty to reunite people with their unclaimed property very seriously.”
According to the lawsuit, Frerichs' office believes the city of Chicago is holding potentially millions of dollars worth of unclaimed property, but is refusing to turn it over to the Treasurer.
The complaint does not indicate precisely what kinds of property the Treasurer believe the city to be holding.
However, unclaimed property reported and surrendered by other cities have included "uncashed checks, duplicate payments and overpayments of amounts owed to a city or other municipality, refunds of deposits and advance payments for municipal utilities and services, like water and sewer, as well as amounts owed to municipal employees for expenses and payroll," a spokesperson for Frerichs said.
According to the complaint, Frerichs' office has discussed the potential turnover of the unclaimed property allegedly improperly held by the city since at least 2019.
However, according to the complaint, the city has steadfastly refused to honor the requests.
According to the complaint, Chicago City Hall has asserted the state law doesn't apply to them, because Chicago is a "home rule" city. Under the Illinois state constitution, such home rule communities are given greater autonomy to govern themselves. Certain state laws governing other municipalities cannot be applied to home rule cities and villages.
According to the complaint, the Treasurer's office has issued a subpoena to the city to provide details on the nature of the unclaimed property it is holding.
The Treasurer's office said the city has agreed to comply with that subpoena, but has not yet done so.
Further, Frerichs said the city has indicated it still would not comply with the Treasurer's demands to turn over the unclaimed checks and other property to the state under the Unclaimed Property Act.
The Treasurer asserted this position defies the law.
"It is well established that Illinois municipalities must comply with the Act, and that home rule authority does not exempt any municipalities from compliance with the Act," the Treasurer and Attorney General's office said in their lawsuit.
They pointed to an Illinois Attorney General's opinion from 1980 in which then-Attorney General William J. Scott told the director of the state's Department of Financial Institutions that "from time immemorial the disposition of unclaimed property has been the prerogative of the State."
Attorney General opinions, while offering guidance on how governments should interpret law, carry no force of law themselves. Notably, former Illinois Attorney General Jim Ryan issued an opinion in 2001 declaring he believed Illinois' Emergency Management law limited the governor's use of emergency powers to a single 30 day period without explicit permission from state lawmakers.
Raoul's office, however, rejected that reasoning amid the Covid pandemic and agreed with Gov. JB Pritzker that the law should be read to allow the governor to essentially reissue emergency orders every 30 days, until the governor alone believes the emergency has passed.
Pritzker famously reissued emergency orders related to the Covid pandemic for more than three years.
In the lawsuit, however, Raoul's office asserted the 1980 opinion on the interplay of home rule and the unclaimed property law means the state should hold sway in the dispute with the city of Chicago.
To hold otherwise, and allow the city to hold unclaimed property under its home rule powers, would essentially create "an uncoordinated regime of separate unclaimed property ordinances and policies by individual" cities which would "interfere with and frustrate the State's traditional ability to apply a single, comprehensive, and uniform system for identifying, administering, and returning unclaimed property to its owners."
They noted no law or ordinance places any requirement on the city to reunite the unclaimed funds and other property with their rightful owners, as the law does upon the state.
In response to questions from The Record, a spokesperson for Frerichs pointed to a 2013 federal appellate decision in which Judge Richard Posner of the U.S. Seventh Circuit Court of Appeals authored an opinion on the constitutionality of Indiana's unclaimed property law and process they required claimants to undergo to regain their property.
In that decision, Posner called the refusal by governments to locate owners and keep the property to invest for themselves "lucrative silence."
Posner said the purpose of unclaimed property laws is to "protect property owners against ... 'lucrative silence,'" in which governments and financial institutions "find doing nothing with its customers' property and communicating as little as possible with its customers to be 'lucrative silence.'"
In the complaint, the Treasurer is seeking a court order directing the city to comply with the state law, along with other unspecified relief.
In the complaint, the Treasurer asserted the city could be compelled to pay penalties and interests, as well, but that was not specifically requested among the list of damages sought from the court.
The city has not yet responded to the complaint in court.