California State Controller Malia Cohen
LOS ANGELES — California Controller Malia Cohen is facing a legal action seeking to stop her office from using the state's unclaimed properties program to allegedly unconstitutionally seize and sell securities and other financial properties worth billions of dollars, including by allegedly altering the addresses of out-of-state or foreign investment owners to justify seizing funds and blocking rightful owners from claiming the property.
The class action lawsuit was first filed in Los Angeles federal court earlier this summer on behalf of foreign investors who claim the state wrongly seized their financial holdings. The action is led by named plaintiffs identified as Paul Hashim, of Texas; Karl Whitty, of the United Kingdom; and Edmilson Cesar Martim Jr, of Brazil, among others.
The plaintiffs are represented by attorneys from the firms of the Palmer Law Group and Larson LLP, both of Los Angeles; and the firm of Shernoff Bidart Echeverria, of Claremont.
On Oct. 7, the plaintiffs followed up their lawsuit with a motion for preliminary injunction, asking the court to order Cohen and her office to cease their alleged illegal actions.
"Even though various courts have decried the improper seizure of private property — and even though the prior Controller publicly apologized and lambasted the improper seizures as 'dead wrong' — Defendants continue the practice of seizing private property without providing proper notice," the plaintiffs wrote in their new motion.
The lawsuit builds on years of litigation between Hashim and California over Hashim's attempts to claim financial properties he says California has illegally blocked him from accessing.
In the new lawsuit and related injunction motion, the plaintiffs center their claims on actions by the Controller's office under Cohen to allegedly sidestep provisions under California's Unclaimed Property Law (UPL) that generally prohibit the state from seizing "unclaimed property" that are held by out-of-state or foreign owners, or which otherwise lack a "nexus to California."
The legal action asserts the Controller's office has failed to provide notice to owners of "unclaimed property," by allegedly improperly restricting notice to small, hard-to-find advertisements in California newspapers or posting the notice only on the Controller's website.
The plaintiffs note that the Controller's office takes limited action to identify and locate the rightful owners of "unclaimed property," including failing to utilize California Department of Motor Vehicles and other state databases to which they have access, "even though the Controller relies on those same databases to verify the identity of claimants when it is time to pay a claim."
That alone amounts to violations of property owners' rights to due process, the lawsuit asserts.
However, the plaintiffs further assert that the Controller's office then took further action to "ensure that they did not receive proper notice" by allegedly altering their addresses to make it appear the assets were owned by California residents.
The plaintiffs, for instance, assert the Controller's office changed Whitty's address in their system from Cardiff, United Kingdom, to Cardiff, California, allegedly enabling them to seize securities worth tens of thousands of dollars owned by Whitty without notice.
The plaintiffs assert this "same misconduct has been directed at many foreign nationals," including Martim. The plaintiffs assert the Controller's office allegedly changed the address associated with his unclaimed property from Santa Barbara, Brazil, to "California 00000," preventing him from claiming his property.
The lawsuit claims the state "profits immensely from the unconstitutional seizure to the tune of billions a year."
Altogether, the plaintiffs claim the Controller's office has claimed control of "over $15 billion taken from over 84 million accounts."
The plaintiffs are seeking a court order blocking Cohen's office from continuing with the alleged illegal seizures of property as their lawsuit continues.
Cohen, 48, has served as California Controller since she was elected in 2022. Cohen ascended to the office out of the San Francisco Democratic Party operation established and run for decades by former California Assembly Speaker Willie Brown, which has also spawned the political careers of Gov. Gavin Newsom, former San Francisco Mayor London Breed and other prominent California Democrats.
From 2011-2019, Cohen served as president of the San Francisco Board of Supervisors, succeeding Breed, her longtime political ally. In 2019, Cohen was selected as chair of the California State Board of Equalization, where she remained until her election as Controller.
Early in her career, Cohen also served as Newsom's chief of staff, when Newsom was mayor of San Francisco.
Cohen is seeking reelection this year as California's chief fiscal officer. She is opposed by Republican candidate, investment professional Herb Morgan, of San Diego.
Cohen's office has not yet responded to the motion for preliminary injunction in court and neither she nor her office have commented on the case publicly.
