Former Employee Blows the Whistle on Delaware Unclaimed Property Exposure

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In a recent unpublished decision, the Superior Court of Delaware, New Castle County, decided to allow a business entity’s former tax manager, joining with the attorney general for the state of Delaware, to proceed with a False Claims Act (“FCA”) case against the entity. The claim alleges that SourceGas Distribution, LLC (“SourceGas”) failed to remit unclaimed property, which the tax manager had identified, to the state. The property came into SourceGas’ possession through an acquisition of a retail gas distribution business from Kinder Morgan. The record was unclear regarding whether Kinder Morgan’s state of incorporation was Delaware or Kansas.

The court permitted a single allegation to proceed past the defendants’ motion to dismiss—the allegation that the company had changed the name of an acquired liability account from “Unclaimed Property Liability” to “Converted Balance from Dec. 2004.” The court found this to be a sufficient allegation of an attempt to conceal unclaimed property from the state. The complaint also alleges that the company “refused to act” when Higgins, the tax manager, brought the issue to management’s attention.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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