California Controller Accused of Falsifying Addresses to Seize Assets

California's top fiscal watchdog, Controller Malia Cohen, and two private contractors are accused of falsifying foreign investors' addresses to seize and sell hundreds of thousands of dollars in stock. The allegations are part of a federal court filing seeking to halt the state's $15 billion unclaimed property program.

The lawsuit claims that Cohen, Kroll LLC, and Kelmar Associates LLC have taken private property without adequate notice and improperly profited from its sale. California law requires banks and other businesses to turn over unclaimed financial assets, such as cash and stocks, to the Controller's Office after owners have not claimed them for a specified period, typically three years.

Plaintiffs allege that officials changed overseas investors' addresses to make their assets appear connected to California, enabling the state to claim property it might not have been entitled to seize. The court filing states that defendants have "weaponized the [unclaimed property law] by seizing, selling, and destroying private property without constitutional notice."

One investor, Edmilson César Martim Jr. of Brazil, alleges that California seized and sold his $708,641.22 in Google retirement stock without notifying him. His Brazilian address was allegedly replaced in property records with "CA 00000."

British investor Karl Whitty claims that contractor Kroll changed his address from Cardiff, United Kingdom, to "CARDIFF, CA 00000." Whitty eventually recovered nearly $4,750 after a 17-month wait, but his shares would have been worth approximately $15,222 if they had not been sold.

The plaintiffs are requesting a federal judge to temporarily prohibit the state from taking possession of additional unclaimed property while the case proceeds. A hearing is scheduled for January 21, 2027, before U.S. District Judge George H. Wu in Los Angeles.

Cohen's office has recently faced other scrutiny. A state auditor's report indicated her office mishandled over $33,000 in employee overpayments and failed to detect managers working remotely from out-of-state locations in violation of state rules.

Republican candidate for controller Herb Morgan criticized the lawsuit's allegations, stating they "raise serious questions about whether [Cohen] possesses the financial competence or judgment this office demands." Morgan added that the state controller "is supposed to protect the people’s money, not treat it as another revenue stream for Sacramento."

The California lawsuit references more than $15 billion in unclaimed property held by the state across approximately 84 million accounts. The state is generally required to safeguard unclaimed property and return it to rightful owners who submit valid claims. However, California typically sells unclaimed securities after receiving them, which can cause owners to miss out on potential gains if they later recover their money.