Federal Lawsuit Accuses California Controller of Falsifying Addresses to Seize Investor Assets
A federal court filing targeting a $15 billion state program illustrates how unclaimed property law, designed to protect owners, can itself become a source of disputed asset transfers when...
A federal lawsuit filed against California State Controller Malia Cohen and two private contractors alleges that state officials falsified foreign investors' addresses in order to seize and liquidate their stock holdings, according to court documents filed in federal court and reported by the New York Post on October 8, 2026.
The suit names Controller Cohen alongside contractors Kroll LLC and Kelmar Associates LLC. The plaintiffs allege that the defendants fabricated foreign addresses for investors, a procedural step that would trigger California's unclaimed property statute by classifying the assets as dormant and subject to state custody.
The filing seeks a court order to halt California's unclaimed property program, which the state reports holds approximately $15 billion in assets, according to the California State Controller's Office public records. The program is governed by California Code of Civil Procedure sections 1500 through 1582, which require the state to make reasonable efforts to notify owners before taking custody of dormant financial accounts, securities, and other property.
The contractors at the center of the case, Kroll LLC and Kelmar Associates LLC, are private firms that states have historically contracted with to conduct unclaimed property audits on behalf of government agencies. Their role typically involves identifying dormant accounts held by corporations on behalf of shareholders or customers and transferring those assets to state custody. Under California law, the original owner retains the right to claim the property from the state after it has been escheated, meaning transferred to the government.
The lawsuit's central allegation is that proper notice was not provided to the affected investors because their addresses were falsified, making it impossible for them to respond to legally required outreach before their assets were seized and sold. The due process implications of that allegation fall under the Fourteenth Amendment, which prohibits states from depriving persons of property without due process of law. Courts have consistently held, including in the 2013 U.S. Supreme Court case Dolan v. United States Postal Service, that adequate notice is a constitutional prerequisite to government seizure of private property.
The complaint also alleges that the contractors improperly profited from the transactions. The specific financial arrangements between the California Controller's Office and Kroll LLC and Kelmar Associates LLC, including the fee structures that governed their compensation, are not fully described in available public reporting as of October 8, 2026. Those terms would be contained in the state contracts between the Controller's Office and each firm, which are public records subject to California's Public Records Act.
Controller Cohen was elected to the California State Controller position in November 2022, receiving 52.5 percent of the vote according to the California Secretary of State's certified election results. She is the first African American woman to hold that office. Her office has not issued a public statement specifically addressing the claims in this lawsuit, as of the publication of this article.
Unclaimed property disputes involving state programs and private contractors are not unique to California. In 2016, a federal court in Delaware ruled against that state's unclaimed property audit practices in the case of Plains All American Pipeline v. Cook, finding that Delaware's contractor-driven audit methods raised due process concerns. Multiple states have faced litigation over the past decade alleging that unclaimed property programs have been administered in ways that prioritize revenue generation over owner notification.
The dollar value of the specific stock holdings alleged to have been improperly seized is described in available reporting only as totaling hundreds of thousands of dollars. The exact figure, the identities of the affected investors, and the specific securities involved are not disclosed in publicly available reporting as of this publication. Those figures would appear in the federal court complaint itself, which is a public document filed in the applicable U.S. District Court.
What remains unknown includes the court's response to the request for a preliminary injunction to halt the program, whether any criminal referrals have been made to state or federal prosecutors, and whether the California Controller's Office has initiated an internal review of the audit procedures used by Kroll LLC and Kelmar Associates LLC. The case docket, including filings and hearing dates, would be available through the Public Access to Court Electronic Records system, known as PACER, under the case name and filing date.