Property Accounting

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Chicago, IL

Posted:

February 01, 2013

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Journal of Multistate Taxation and Incentives (July 2009, Vo. 19, No. 4)

Department: PROCEDURE

Going Fishing: State Budget Deficits Drive an Expanding

Net of Unclaimed Property Collections

States are actively pursuing unclaimed property to mitigate budget

shortfalls, and businesses need to include unclaimed property as a vital

and necessary consideration for sound financial reporting.

Author: ROBERT S. PETERS AND MATTHEW J. BEINTUM

ROBERT S. PETERS, CPA, is a managing director at Duff & Phelps

LLC in the firm's Chicago, Illinois office, where he serves as the

firm's national practice leader for Unclaimed Property and Tax Risk

Advisory. He has more than 30 years of experience providing state,

local, and federal tax services to corporate clients, and is a

frequent speaker, writer, and contributor to national publications

on state and local tax and unclaimed property topics. He can be

reached at ******.******@*************.*** or 312-***-****.

MATTHEW J. BEINTUM is a vice president with Duff & Phelps, also

in the Chicago office, where he is a member of the company's

Unclaimed Property Practice. He has more than eight years of

experience in unclaimed property and corporate and individual tax

compliance, and has frequently spoken on unclaimed property

issues. He can be reached at

*******.*******@*************.*** or 312-***-****. This

article appears in, and is reproduced with the permission of, the Journal of

Multistate Taxation and Incentives, Volume 19, Number 4, July 2009.

Published by Warren, Gorham & Lamont, an imprint of Thomson Reuters.

States are facing steep deficits. The Center on Budget and Policy Priorities estimates that

the combined deficits over the next two-and-a-half years from now until the summer of

2011 are likely to be in the $350 billion to $370 billion range approximately 20% of

state budgets in total. 1

Trimming expenses is not enough to balance the books, as unemployment increases,

income tax revenues decrease, and a multitude of other factors send states on a

scavenger hunt to find alternative sources of revenue. In a muted, yet increasingly

diligent fashion, states have considered unclaimed property to be the functional

equivalent of loose change found between a couch's cushions: unanticipated, unallocated

money to be added to a state's general fund. Except, in this instance, the loose change

adds up to about $35 billion, 2 and as states set their sights squarely on this revenue,

there is a corresponding need for companies to integrate unclaimed property practices

and procedures into the fabric of their financial reporting.

Unclaimed Property An Overview

To understand where we are today, and where the issue of unclaimed property

(commonly referred to also as "abandoned property" or "escheat," which is the process

by which the government acquires an interest in such property) is likely to lead, it is

useful first to gain a little historical perspective. Unclaimed property laws date back to

feudal times under British common law. During that time, the laws provided that the title

to property having no designated owner would escheat to the king (for example, where a

property owner died without heirs).

In U.S. history, in the 18th and early 19th centuries unclaimed property laws (to the

extent they existed) dealt primarily with states' rights to claim real property. With the

advent of the Industrial Age, the states expanded the focus of unclaimed property to

tangible personal property, including the contents in safe deposit boxes, and certain

intangible property, such as funds represented by uncashed checks.

In 1954, when interstate commerce was in full swing and potential conflicts between the

states abounded, the Uniform Disposition of Unclaimed Property Act (the "1954 Act") was

adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL).

Since the 1954 Act, three additional versions of uniform unclaimed property acts (1966,

1981, and 1995) have been approved by the NCCUSL. 4 Most states have adopted some

version of one or more of these acts. 5

With the most recent modifications, based in large part on the U.S. Supreme Court's

ruling in Delaware v. New York, 6 the list of items constituting unclaimed property was

expanded, as was the definition of who constitutes a "holder," the ultimate obligor

required to report and remit unclaimed property. Under the 1995 Uniform Unclaimed

Property Act, the definition of "property" in the context of "unclaimed property" was

broadened to include both tangible and most important the types of intangible property

that were subject to escheatment. It is this latest Act that empowers the adopting states

to review virtually any general ledger category within a corporation's chart of accounts

for possible property subject to escheat.

These Acts have changed the focus of unclaimed property rights considerably over the

years. Whereas, originally, the purpose of the provisions was to have the states

ultimately serve as fiduciary of specific classes of tangible and intangible property (e.g.,

safe deposit boxes and uncashed checks), the 1995 Act opened the door for the states to

conduct a much broader search for unclaimed property in the hands of certain corporate

"holders" (the persons obligated to hold for the account of the owner, or deliver or pay to

the owner, property that is subject to escheat).

Three parties are involved in administration of the unclaimed property provisions. These

include the "holder" (defined above); the "owner" (the person who has legal or equitable

title to the property, and to whom the property is owed); and the state, which serves as

the ultimate fiduciary of any unclaimed property if the true owner cannot be located.

A company-holder that discovers unclaimed or abandoned property must make suitable

efforts to track down the rightful owner a process referred to as due diligence. If such

efforts by the holder prove fruitless and the "dormancy period" (the specified number of

years after which unclaimed property is deemed abandoned) has expired, the holder

must turn the property over to the state.

In a more simple sense, the escheat laws seem reminiscent of the lessons learned on a

grade school playground: "finders keepers." When the state finds funds in the form of

forgotten bank accounts, unspent gift cards, uncashed checks, etc., it can claim "fiduciary

responsibility" and keep the money, perhaps in perpetuity.

But which state gets the property? When a company is about to remit

property to a state, the first level of inquiry is: Which state? The answer depends on two

priority rules established by the U.S. Supreme Court in Texas v. New Jersey. 7 Under the

primary rule, the property is remitted to the state of the owner's last-known address as

shown on the holder's books and records. If no address can be determined from the

holder's books and records, or the last-known address is in a jurisdiction that does not

provide for escheat of the property, the property is remitted to the state in which the

holder is incorporated. (For 60% of Fortune 500 companies, the state of incorporation is

Delaware. 8)

A third rule that initially was rejected by the Supreme Court appears to be rising like a

phoenix from the ashes in at least one state. Under this rule, the state in which the

particular transaction occurred would have priority if there is no last-known address for

the owner and the holder's state of incorporation does not provide for escheat of the

property. (See further discussion below.) 9

States Seek Revenue

The escheat law environment can be a confusing and convoluted system of jurisdiction,

where the very definition of "unclaimed property" let alone varying dormancy periods

and reporting procedures differs by state. Perhaps not surprisingly, therefore, recent

estimates suggest that only about one-third of such property is returned to the original

owners. Barely a decade ago, the total collected by states through escheat laws was less

than $15 billion. By mid-2006, the states held about $35 billion. In 2006 alone,

unclaimed property collections were around $5.1 billion, up from $3.6 billion in 2003. 10

Delaware has become the industry's most prevalent example of a state that has come to

rely on unclaimed property as a means of materially increasing revenue. Unclaimed

property makes up more than 10% of Delaware's state revenues, behind only individual

income tax and franchise tax. In 1996, escheat of unclaimed property boosted the state's

general revenue fund by $76 million. In 2001, that number more than doubled, to $163

million. By 2006, Delaware's unclaimed property added more than $325 million to the

state's coffers and grew to more than $375 million in 2008. 11

Delaware, while an extreme case, is not alone. In the last several years, cash-starved

states have been acting more like private investigators, finding money in the nooks and

crannies of a company's balance sheet, inventory logs, and interactions with the third

parties the company may engage to outsource its employee-benefit and rebate activities.

Many states seem to be taking advantage of unclaimed property collections, seeking

windfalls in a manner that, if not by the letter of the law then certainly by the spirit of it,

appears to contravene the elaborate safeguards that have traditionally protected

unclaimed property.

Today, more than 40 states have begun using third-party auditors to assist them with

tracking down companies that are being considered "noncompliant" with unclaimed

property reporting requirements. These outside agents work on a contingent-fee basis to

spearhead enforcement efforts, sometimes pushing the limits and discovering liabilities

that go well beyond traditional legal interpretations.

Practices such as these have brought forth critics who contend that states have

overextended the definition of what constitutes "unclaimed property" and have placed an

undue burden on businesses to meet compliance requirements. These critics argue that

the states' recent practices are a far cry from the intent of the uniform acts, where the

states were charged with the responsibility of serving as custodians of unclaimed funds.

As custodians the objectives were to meet the following criteria:

Convenience: Establish one place for an owner to search for funds.

Protection: Safeguard the owner's property until returned.

Public use of funds: Enable citizens of the state to benefit from the unclaimed

funds (vs. the holder) until such monies are reunited with the rightful owner.

Fairness: Prevent an unjust windfall to the holders of the property. 12

Many financial officers of companies that have fallen subject to audit by these third-party

auditors have voiced frustrations with both the expanding definition of what is deemed to

constitute "unclaimed property" and the recordkeeping requirements, which, because of

the extensive audit period, create an undue burden on corporations to disprove that

unclaimed property does not exist in earlier periods when records no longer are available.

Many cite that the large liabilities presented by the third-party auditors stem from "lack

of sufficient accounting records" and imagined liabilities from unclaimed property that

literally is owed to no one.

To better illustrate, less than a decade ago unclaimed property, and related reviews by

state authorities, were typically limited to stock certificates, dividend checks, and bank

accounts that went unclaimed by their rightful owners. Over the last several years,

however, scores of articles (like this one) have highlighted the expansive audit scope,

which may include review of a corporation's books and records for evidence of uncashed

payroll, refund, or vendor checks; open credit balances and credit memos; and duplicate

payments 13; all of which are included in the expansive definit ion of "unclaimed property"

under the 1995 Act. Now, states are expanding their unclaimed property net even further

to include deposits, unredeemed gift certificates, gift cards, rebates, and, in one recent

development, bottle and can deposits. 14

Recent State Efforts

The breadth of what is now deemed to constitute unclaimed property is enough to cause

any chief financial officer to lose sleep. Examples where the states have increased their

efforts in detection of "unreported" or "underreported" property are as follows:

Prepaid cards. Over the past several years, the growth of gift cards, reward cards,

and other forms of prepaid cards and certificates has been explosive. Industry sources

estimate that over $88.4 billion of gift cards were sold over the 2008 holiday season

alone. 15 Some states have tapped into the unredeemed portion of gift cards, or

"breakage," as a source of unclaimed property revenue. Others who want to appear

"retailer friendly" have either eliminated all forms of gift cards from the unclaimed

property provisions or provided for specific exemptions from escheatment if certain

conditions are satisfied. These conditions, which include easing or eliminating expiration

periods and restricting fees that can be charged to the card holders, serve as a deterrent

to merchants who have been criticized in the past for taking advantage of customers who

may not have redeemed loaded gift cards in time to avoid fees and charges for non -use.

Many companies, in turn, have capitalized on the favorable treatment afforded by these

states to retain otherwise reportable unclaimed property resulting from the unredeemed

portion of gift cards. In one very public display of the magnitude of potential unclaimed

property savings that can be accomplished, national electronics retailer Best Buy reported

a $43 million benefit in pre-tax net income for fiscal 2006, due entirely to the planning

they accomplished to avert turning over to the states funds from gift card breakage. 17

The states have recognized the potential in lost revenue that can result from unredeemed

gift cards and prepaid cards, and in a game of "cat and mouse," have in turn begun

revising their unclaimed property statutes to expand their reach of the breakage. As

noted above, some states have tried to expand on the priority rules for determining the

state entitled to escheatment by creating a third rule. 18 This rule would take effect if the

owner's address were unknown and the holder's state of incorporation did not escheat

the unredeemed portion of the gift card. In that situation, the state entitled to lay claim

to the unclaimed property would be the one in which the original transaction occurred,

i.e., the state where the gift card was sold.

Another state attempted to take a slightly different approach. Maryland currently

exempts unused gift cards from treatment as unclaimed property. In January 2009, H.B.

126 was introduced in the state legislature, intended to reverse provisions exempting

unredeemed gift cards from escheatment. The proposed legislation would have required

any business that had unused portions of gift cards sold in Maryland to remit 70% of the

breakage as unclaimed property. 19

Inventories. Most wholesalers, retailers, and manufacturers maintain inventories of

goods, held either for manufacture or further processing or as finished products. Much of

this inventory purchased from third parties is carefully accounted for via sophisticated

accounting and "enterprise resource planning" (ERP) systems 20 that record both volume

and price variances. Within these systems, it is not uncommon for a company to receive

quantities from a supplier in excess of the original order. These volume differences can

result for any number of reasons including, but not limited to, accounting errors, odd or

broken lots, damaged goods, or receiving tickets or bills of lading mismatched to the

original purchase order.

Inaccurate accounting for inventories can lead to a potential unclaimed property liability.

If goods are received but not yet invoiced, a company can be held accountable for the

ostensible surplus. Thus, states have begun looking at the over/under counts with

customers and vendors.

The burden of proof lies with the holder 21 to provide support that inventory over/under

counts are not unclaimed property. Due to the nature of this type of property, a company

can literally have hundreds of thousands of invoices or transactions annually. This volume

of data makes a company's task of proving it does not owe this unclaimed property

extremely difficult. In an audit where the state may be looking back over ten or more

years, this task is almost impossible.

Critics argue that inventory over/under counts should not be considered unclaimed

property at all. Since it is a common occurrence between two companies with an ongoing

relationship, one could argue that any inventory discrepancy between a company and its

vendors simply will be resolved with an ensuing invoice.

Rebate checks. Rebate checks have recently become a new area of focus for states

in search of unclaimed property. It has been reported that U.S. companies offer between

$4 billion and $10 billion in consumer rebates each year. 22 The cumulative value of

uncashed rebate checks, known in the industry as "slippage," is estimated to be in the

hundreds of millions of dollars. A company issuing the rebate may consider the

unredeemed portion to be free money; this may not be the case, however.

One example of this situation, the litigation in Fitzgerald v. Young America Corporation, 23

arguably started the focus on rebates. In 2006, the Iowa state treasurer filed suit against

Young America, the nation's largest rebate fulfillment house, alleging that the company

failed to report and remit nearly $43 million in uncashed rebate checks. Since then, more

than 40 other states have joined the suit seeking damages of more than $120 million.

The suit also named three of Young America's customers: Sprint, T-Mobile, and

Walgreens.

In October 2008, these three customers (referred to as the "merchant defendants")

submitted summary motions for dismissal of the charges, arguing that since they were

never in possession of the rebate money, they could not be held liable for failing to remit

any uncashed rebated checks as unclaimed property.

In January 2009, the Iowa district court denied all three motions for dismissal. 24 While

not addressing all issues raised by Sprint, T-Mobile, and Walgreens, the overall context of

the ruling appears not to be in favor of the merchant defendants. The state has recently

settled with Walgreens and T-Mobile, 25 but the case is ongoing with the remaining

defendants. The outcome of this case may have a profound effect on rebates in the

future.

General accounting errors. Another source of potential unclaimed property

liability may be found in accounting errors. What may appear to be unclaimed property

could be instead the result of a simple accounting error; the state, however, may not

make any such distinction. Consider, for example, customer credits that are reflected in a

company's aged trial balances. State-designated auditors have made a practice of

concentrating a great deal of attention on the following books and records:

Annual and monthly accounts receivable aging reports.

Miscellaneous expense accounts and miscellaneous income accounts.

Bad debt write-off account activity.

In reviewing past activities in these accounts, the auditors are seeking outstanding

accounts receivable credit balances or evidence where similar customer credits have been

written off by the company, either to an "other income" account or against bad debt

accruals. These write-offs would be used to support the notion that they result from

customer overpayments, duplicate payments, prepayments, or longstanding deposits all

items that, over time, would constitute unclaimed property if not returned to the

customer.

In the past, good accounting practice undoubtedly was to clear longstanding credits from

a company's balance sheet. Nevertheless, until the recent wave of unclaimed property

audits, few if any corporate accounting personnel made a habit of documenting each and

every customer credit activity in order to avoid characterization as an item of unclaimed

property. The auditors, being mindful of past practices, typically view sample

transactions. Any lack of documentation by a company is used as evidence that a larger

population of unclaimed property exists from similar activities for all prior years.

As mentioned above, the burden of proof lies with the holder. Proving that what appears

to be reportable unclaimed property is, in fact, the result of an accounting error, can be

very difficult, particularly when record-retention policies and accounting-system

conversions result in the unavailability of data beyond a typical five-to-seven-year (or

even shorter) period.

In contrast to income taxes, unclaimed property does not have a statute of limitations.

The potential danger from accounting errors is most prevalent during a state or thir d-

party audit. Audits can cover periods going back 10 or 25 years or more. For years for

which data is unavailable, an extrapolation based on current data is often used to

estimate unclaimed property for earlier years. Today's $5,000 accounting error, when

extrapolated back 15 or more years, can easily grow to well in excess of $50,000. It is

easy to see why unclaimed property has become both lucrative for the states and a

painful experience for financial officers.

Conclusion and Guidance

While the escheat law environment is complex and continues to evolve, corporations still

can take measures to prepare for the newly invigorated unclaimed property efforts

initiated by the states.

Companies might consider retaining a subject-matter expert familiar with unclaimed

property issues, which are highly nuanced and constantly evolving. And, after all, if the

states are employing outside firms to seek out unclaimed property, companies should be

advised and counseled with equal resources.

Appropriate parties within an organization should, of course, be informed and alerted to

the issue, so that they are in a position to raise red flags with the senior finance team.

Unclaimed property collections can be an exposed flank on an otherwise well-fortified

balance sheet. Corrective action can be taken, however, only if the issues are identified

and documented.

Companies might also review existing record-retention policies to ensure that sufficient

historical information can be captured to meet all state-specific requirements to identify,

track, and report unclaimed property. Similarly, there should be a renewed focus on

consistent policies and procedures that enable the various functional divisions within a

corporation, including accounts payable, accounts receivable, and payroll, to identify

types of unclaimed property and then track its progress during the inactivity period.

Finally, a company should establish clear administrative responsibility for monitoring,

tracking, and reporting unclaimed property. To assume other divisions or departments

within an organization are keeping a watchful eye on such matters can create a "blind

spot" of unclaimed property liability.

As has been demonstrated with prevalent and expensive consequences states are

actively pursuing unclaimed property to mitigate budget shortfalls. Companies need to be

aware and include unclaimed property as a vital and necessary consideration for sound

financial reporting. []

Sidebar

Practice Note: Dealing With States' Searches for Unclaimed Property

As noted in the accompanying article, the escheat law environment is complex and

continues to evolve. As a result, businesses need to take measures to prepare for the

invigorated unclaimed property efforts initiated by the states. Companies might consider

the following actions:

Alert appropriate parties within the organization to the issue so they are in a

position to raise red flags with the senior finance team.

Review existing record-retention policies to ensure that sufficient historical

information can be captured to meet all state requirements for reporting and

remitting unclaimed funds.

Inaugurate a renewed focus on consistent policies and procedures that enable the

various functional divisions within a business to identify the various types of

unclaimed property and track their status during the period of inactivity.

Establish clear administrative responsibility for monitoring, tracking, and reporting

unclaimed property.

Finally, consider retaining a subject-matter expert familiar with unclaimed

property issues. If the states are employing outside firms to seek out unclaimed

property, businesses should be equally advised and counseled.

NOTES

McNichol and Lav, "State Budget Troubles Worsen" (Center on Budget and Policy

Priorities, updated 5/13/09), available online at www.cbpp.org/files/9-8-08sfp.pdf. As

described on its website (www.cbpp.org), the Center is a nonprofit policy organization

that works at the federal and state levels on fiscal policy and public programs that affect

low- and moderate-income families, conducting research and analysis in these areas to

help shape public debate.

Thurm and Tam, "States Scooping Up Assets From Millions of Americans," Wall St. J.,

2/4/08, page A1.

Such a "uniform act" is a proposed set of laws intended to provide the states with rules

and procedures that are consistent from state to state. It is offered to the states for

incorporation into their own statutes. A state may reject the entire act, or adopt it in

whole or in part or with modifications.

The 1966 Uniform Disposition of Unclaimed Property Act contained relatively minor

changes that addressed concerns regarding money orders and traveler's checks. The

1981 Uniform Unclaimed Property Act contained more substantial revisions and, in

defining unclaimed intangible property, specifically added unredeemed gift certificates.

The 1981 Act also sought to resolve potential conflicts among competing jurisdictions by

adding a reciprocity clause that allowed a state to claim abandoned property if the last

known address of the claimant was in that state and other states agreed to forgo the

claim. Prior to the 1981 Act, gift products not redeemable in monetary value were not

considered to be unclaimed property. Finally, the NCCUSL adopted the 1995 Uniform

Unclaimed Property Act.

The only states not adopting any of these uniform unclaimed property laws are

Delaware, Kentucky, Massachusetts, New York, Ohio, and Texas.

507 US 490, 123 L Ed 2d 211 (1993).

379 US 674, 13 L Ed 2d 596 (1965).

Feldman, "Delaware Law Weekly Launches New Web Site Design, With Expanded

Content and Complete Access to Case Digests and Archives" (Incisive Media Press

Release, 3/11/09), available online at

www.reuters.com/article/pressRelease/idUS144963+11-Mar-2009+BW20090311.

For more on the U.S. Supreme Court's holdings in Texas v. New Jersey, supra note 7,

and Delaware v. New York, supra note 6, as well as more background on escheat

generally, see, e.g., McTaggart and Frazer, "Escheat: Are Serious Legal Changes and

Potential Liability Ahead?," 13 J. Multistate Tax n 14 (Mar/Apr 2003). See also Hall,

Chenowth, and Jensen, "Exemptions in Unclaimed Property Fact or Fiction?," The Tax

Adviser 464 (July 2001), available online via the AICPA's website at www.aicpa.org

(select "Magazines and Newsletters" and click on "The Tax Advisor" and "Archives").

See Thurm and Tam, supra note 2.

Delaware Fiscal Notebook, available on the state's Department of Finance website at

http://finance.delaware.gov (select "Financial Reports"). According to the website, the

Notebook is a "user friendly guide providing policymakers and interested citizens with

useful revenue, expenditure, pension, debt, and budget information." Also see the

Delaware Economic and Financial Advisory Council (DEFAC) "Financial Forecast," available

via the same website (after accessing the DEFAC report, click on "Revenues").

See "Abandoned Property Laws and Network Branded Prepaid Cards: Questions and

Concerns Raised When Trying to Fit Cards Into the Existing Abandoned Property Legal

Framework" (NBPCA White Paper, 2/28/09), available online at

www.nbpca.com/docs/AbandonedPropertyWhitePaper.pdf. (According to its website, the

Network Branded Prepaid Card Association was founded in 2005 as a nonprofit, inter -

industry trade association whose "goal is to represent the common interests of the many

players in this new and rapidly growing business." Generally, "network branded prepaid

cards" (or "open-loop" cards) are issued by a bank or other financial institution; they

display the brand of a payment network and are usable at multiple, unaffiliated retailers.

This is in contrast to "closed-loop" or "retailer" gift cards, usable to purchase goods or

services from a single retailer or chain.) See also Douglas Aircraft Co. v. Cranston, 58

Cal. 2d 462, 24 Cal. Rptr. 851, 374 P2d 819 (1962), where the court stated: "The

objectives of the [Uniform Disposition of Unclaimed Property Act] are to protect unknown

owners by locating them and restoring their property to them and to give the state rather

than the holders of unclaimed property the benefit of the use of it, most of which

experience shows will never be claimed."

See, e.g., Sweeney, "Unclaimed Property Audits: George Orwell Would Be Proud," 51

The Tax Executive 436 (September-October 1999).

Stuart, "Bottle Distributors Sue State Over Nickel Deposits" (4/17/09), available online

at the Connecticut news site www.ctnewsjunkie.com (click on "News Links" and

"Environment" or "Courts").

"TowerGroup Projects Nearly 9% Decline in Gift Card Sales" (11/18/08), available online

via www.paymentsnews.com (select "Archives"), a website where Glenbrook Partners

LLC, a payments consulting and research firm, posts news stories of interest to the

electronic payments industry.

Jakobson, "Feds Crack Down on Gift Cards," Incentive Magazine, 10/21/06, available

online via the magazine's website at www.incentivemag.com using the "Advanced

Search" function.

Best Buy Co., Inc. 2006 Annual Report.

See, e.g., Tex. Prop. Code Ann. 72.1016; Nev. Rev. Stat. 120A.520.

H.B. 126, introduced to House Committee on Economic Matters, 1/23/09; reported

unfavorably, 2/17/09; withdrawn from further consideration, 2/17/09.

ERP refers to the use of software to automate various activities to help a business

manage important parts of its operations, including, e.g., inventory control, interacting

with suppliers, and tracking orders. The data from those different areas are stored in a

single database, accessible by all departments in order to serve their particular needs.

Sweeney, supra note 13.

Edwards, "The Law, Marketing and Behavioral Economics of Consumer Rebates," 12

Stanford J. L. Bus. & Fin. 362 (Spring 2007).

Iowa Dist. Ct. Polk County, No. CV 6030, petition filed 2/8/06.

Fitzgerald v. Young America Corporation, Iowa Dist. Ct. Polk County, No. CV 6030,

1/5/09.

See (1) Fitzgerald v. Young America Corporation, Sprint Nextel Corporation, T -Mobile

USA, Inc., and Walgreen Company, Iowa Dist. Ct. Polk County, No. CV 6030, stipulations

of dismissal by plaintiff, Young America Corporation, and Walgreen Company, 4/17/09;

and (2) the May 2009 "Settlement Agreement and Mutual Release of Claims" between the

Iowa treasurer and T-Mobile (whereby the company agreed to remit to the state $6,900,

inclusive of interest, representing all uncashed rebate checks written and sent to its Iowa

customers by Young America in connection with T-Mobile rebate programs in 2001-

2003).

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