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* Treasurer Frerichs…
Crooked businesses would be able to keep taxpayer money without fear of punishment if legislation pushed by the Illinois Chamber of Commerce and supported by Gov. Bruce Rauner becomes law, Illinois Treasurer Michael Frerichs said today.
SB2901 would outlaw the use of auditors to ensure that businesses are properly reporting unclaimed property to the state of Illinois. Examples of unclaimed property include unpaid life insurance benefits, forgotten bank accounts, and unclaimed rebate checks. If enacted into law, not only would hundreds of millions of dollars be kept by dishonest businesses instead of paid to the rightful owners, honest businesses would be at a competitive disadvantage simply by following the rules.
Illinois holds more than $2 billion in unclaimed property. Of that, more than one-fourth, or $612 million, is a direct result of audits. Illinois’ current system of audits began under then-treasurer Judy Baar Topinka, a Republican the chamber of commerce previously supported and a person Rauner called one of the state’s “all-time greats”.
“On what planet does keeping something that you know does not belong to you deserve to be protected by special legislation,” Frerichs said. “Honest mistakes happen. That is why every industry in America uses audits. If this legislation comes to pass, it would be impossible to identify which companies were following the rules, regardless of their intent.”
Audit success stories inside the Illinois Treasurer’s Office include:
Between 2011 and 2015, audits identified more than $550 million in unpaid life insurance death benefits that should have been paid. In some cases, the insured had been deceased for decades.
In 2016, Sprint agreed to surrender $2.3 million owed to 32,000 Illinois residents who did not cash rebate checks. In that same year, Radio Shack agreed to surrender uncashed rebates worth $140,000 owed to 5,000 Illinois residents. Audits identified these rebates still owed to Illinois residents.
In 2018, Chicago-based Kemper Corp. reversed course and dropped a lawsuit to block audits after previously indicating in federal filings that their position “creates a risk of reputational damage.”
In 2017, Rauner tried to kill the Life Insurance Reform Act by issuing an amendatory veto that effectively prohibited the use of outside auditors. Lawmakers wisely rejected that proposal because it would have gutted Illinois’ unclaimed property law. SB 2901 again attempts to eliminate the use of audits.
* Illinois Chamber…
Treasurer Frerichs’ press conference held earlier today inaccurately depicted the contents of SB 2901. Firstly, the legislation does not take away the treasurer’s ability to use auditors and saying so is simply inaccurate.
Chamber initiative, SB 2901, allows all types of audits except for those funded on a contingency basis. That is those audits conducted by an outside firm where the firm is compensated based on how much revenue they can extract from businesses. Contingency firms typically are only compensated by the amount of revenue they identify creating a tremendous incentive that puts businesses at a disadvantage.
Secondly, the problems the Illinois Chamber is seeking to address were included as part of the massive tax increase pushed through the Legislature and vetoed by the governor in 2017. The purpose of the tax increase was a massive revenue grab and the provisions the treasurer defends are part of that grab.
When it comes to auditing businesses, the treasurer has options. He should use its office’s existing resources more efficiently; hire outside auditors who are paid on a regular fee basis, not by how much revenue they can extract; or the Treasurer’s Office could return the unclaimed property program to the successful administration of the Illinois Department of Financial & Professional Regulation.
More here.
posted by Rich Miller
Monday, Mar 12, 18 @ 3:15 pm
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–Contingency firms typically are only compensated by the amount of revenue they identify creating a tremendous incentive that puts businesses at a disadvantage.–
What disadvantage is that, exactly?
Maybe the Chamber’s go-to guy, Dunkin, can explain.
Comment by wordslinger Monday, Mar 12, 18 @ 3:20 pm
So, to crush the Chamber’s response, all Friedrich’s has to to do is disclose how many of the success stories came from contingency audits.
If he does not amend his statement, then we know the answer.
Comment by Wondering Monday, Mar 12, 18 @ 3:27 pm
=== … compensated by the amount of revenue they identify creating a tremendous incentive that puts businesses at a disadvantage. ===
Translation: These auditors may be motivated to do their jobs better which prevents businesses for keeping more money than they should.
Comment by Norseman Monday, Mar 12, 18 @ 3:45 pm
“from keeping”
Comment by Norseman Monday, Mar 12, 18 @ 3:46 pm
There’s a reason the IRS doesn’t pay its agents on a contingency basis. The Chamber isn’t wrong on that particular point.
Comment by notsosure Monday, Mar 12, 18 @ 4:02 pm
Ever since his 529 program BS whenever he says anything I don’t believe him. I actually took the time to write the guy. No response. So glad I have entrusted 6 figures to the guy…
Comment by Best Mom Ever Monday, Mar 12, 18 @ 5:07 pm
So the Chamber’s argument is that money owed by businesses should not be collected aggressively? When the shoe is on the other foot (consumer default), you can bet the sharks are a-comin’. They don’t want to pay what they owe. It’s that simple.
Hypocrisy. Dunkinesque.
Comment by unspun Monday, Mar 12, 18 @ 5:43 pm
From the article: “Maisch suggested Frerichs could instead have staff in the treasurer’s office to conduct audits, hire outside firms at an hourly rate or hand off the responsibility to another agency.”
The money for this would come from where? I’m guessing the Chamber prefers this option because they could try to limit or cut off funding. Based on Maisch’s “solution,” I suspect that the contingency firms are finding a fair amount of money in this program. Who else has an incentive?
BTW, business types typically put this type of private regulatory “enforcement” (contingency fee based) forward as a replacement for burdensome agency oversight, so I find Maisch’s proposal as less than sincere.
Comment by Pot calling kettle Monday, Mar 12, 18 @ 6:15 pm
On a contingency basis also means that the person looking for his parents’ life insurance payments maybe can’t afford to hire an auditor, and this would be the only option.
Contingency firms put the insurance company at a disadvantage? How so? Either they have to pay out the money or they don’t. It would be in Illinois’ best interest that it’s citizens are paid what is coming to them.
Comment by Da Big Bad Wolf Tuesday, Mar 13, 18 @ 6:50 am
Corporate America is all for incentives, merit pay and pay-for-performance, but not when it comes to scrutinizing its own behavior.
Comment by Truthteller Tuesday, Mar 13, 18 @ 9:05 am