California’s unclaimed property program faces a federal court challenge accusing officials of fabricating addresses to seize assets from foreign investors.
The lawsuit names state Controller Malia Cohen, 47, and two private contractors — Kroll LLC and Kelmar Associates LLC — as defendants in a case that seeks to halt the state’s $15 billion unclaimed property system. The plaintiffs filed a motion Wednesday in federal court in Los Angeles alleging a pattern of property seizures without constitutional notice.
One plaintiff, Edmilson César Martim Jr. Of Brazil, claims California seized and sold $708,641.22 in Google retirement stock without notifying him. According to the court filing, his Brazilian address was replaced in official records with “CA 00000,” a designation that made the assets appear connected to California and therefore subject to state seizure.
Martim said he traveled several hours to a U.S. Embassy to obtain notarized documents required to recover his money, only to have his claims repeatedly denied by the controller’s office.
British investor Karl Whitty encountered a similar address change. The filing alleges contractor Kroll altered his address from Cardiff in the United Kingdom to “CARDIFF, CA 00000.” Whitty eventually recovered almost $4,750 from the state, but only after waiting 17 months. His shares would have been worth approximately $15,222 if they had not been sold, according to the filing.
The plaintiffs are asking U.S. District Judge George H. Wu to temporarily prohibit the state from taking possession of additional unclaimed property while the case proceeds. A hearing is scheduled for Jan. 21, 2027, in Los Angeles.
The court filing pulls no punches in its characterization of the program’s operation. “Instead of upholding the purpose of this law, Defendants have weaponized the [unclaimed property law] by seizing, selling, and destroying private property without constitutional notice,” the motion states. It also accuses Cohen of “seizing the property she cannot control from persons she has no authority over.”
Under California law, banks and other businesses must turn over financial assets — including cash, stocks and insurance payouts — to the state Controller’s Office when owners fail to claim them or make contact for a specified period, typically three years. The state generally sells unclaimed securities after receiving them, meaning owners who later recover their money may miss out on subsequent stock-market gains.
Cohen was already under scrutiny before this lawsuit emerged. A state auditor’s report last week found her office mishandled more than $33,000 in employee overpayments and failed to detect managers working remotely from Idaho, Alabama and Tennessee in violation of state rules.
Herb Morgan, a Republican candidate for controller in November’s election, seized on the court filing to attack Cohen’s management. “Malia Cohen has demonstrated a stunning lack of financial judgment and a fundamental misunderstanding of her responsibility as California’s chief fiscal officer,” Morgan said.
He continued, “The state controller is supposed to protect the people’s money, not treat it as another revenue stream for Sacramento,” Morgan added that the filing “raises serious questions about whether [Cohen] possesses the financial competence or judgment this office demands.”
The lawsuit cites more than $15 billion in unclaimed property held by the state across approximately 84 million accounts. That figure represents property held by the state, not assets proven to have been illegally seized.
The unclaimed property program has drawn broader federal attention in recent months. In February, a federal Labor Department watchdog warned that $192 million in unused COVID-era unemployment benefits had been transferred to state unclaimed-property offices, raising concerns about potential fraud and the need to recover taxpayer funds.
The controller’s office did not immediately respond to a request for comment on the lawsuit’s allegations.