A new federal lawsuit accuses California Controller Malia Cohen and two contractors, Kroll LLC and Kelmar Associates LLC, of taking private property without adequate notice and improperly profiting from its sale. The filing centers on California's unclaimed-property program, which the suit says has swept up more than $15 billion in property across roughly 84 million accounts, and alleges officials altered the addresses of overseas investors to make their holdings look connected to California so the state could seize and sell their stock.
According to the New York Post, the court filing, lodged Wednesday, accuses Cohen of seizing property from people over whom she had no authority and says defendants seized, sold, and destroyed private property without constitutional notice. Plaintiffs are asking a federal judge to temporarily block the state from taking any 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, per the same report.
Two individual plaintiffs illustrate the allegations. Kroll allegedly changed U.K. resident Karl Whitty's address from Cardiff, United Kingdom, to “Cardiff, CA 00000,” and Whitty says he waited 17 months to recover his funds, eventually getting back almost $4,750 — far less than the roughly $15,222 his shares would have been worth had they not been sold. Brazilian resident Edmilson César Martim Jr. alleges his Brazilian address was similarly replaced with “CA 00000,” and that California seized and sold $708,641.22 in his Google retirement stock without notifying him.
A Trip to the Embassy, and Repeated Denials
Martim says he had to travel to a U.S. embassy to obtain notarized documents just to try to recover his money, and he told the outlet that the controller's office repeatedly denied his claims. The lawsuit frames both cases as examples of a broader pattern in which owners who eventually recover sold securities may still miss out on subsequent stock-market gains, since the state generally sells unclaimed securities once they are received rather than holding the original assets.
Under California law, banks and other businesses must turn over unclaimed financial assets to the State Controller's Office, and the state is required to safeguard that property and return it to rightful owners who file valid claims. Owners may submit claims to the controller's office for unclaimed property. The controller's office did not respond to a request for comment on the lawsuit, the Post reported.
A Program Under Separate Scrutiny
The lawsuit lands as California's unclaimed-property program is already facing scrutiny on another front. A California State Auditor investigation found that two State Controller's Office employees teleworked from Idaho, Tennessee, and Alabama while not residing in California, according to the California State Auditor. The Post's report additionally states that the auditor's findings, dated October 1, 2026, identified a year-long delay in collecting more than $33,000 in employee accounts receivable.
Separately, the state has been trying to return money to residents through other channels. The State Controller's Office is sending letters to about 130,000 Californians who may be owed unclaimed property, identifying potential claimants by matching unclaimed-property records with state tax records through a partnership with the Franchise Tax Board, according to KMPH. A similar outreach campaign launched in December 2025 mailed more than 100,000 letters and returned more than $30 million to Californians, the station reported.
Nationally, unclaimed-property enforcement has intensified. The Journal of Accountancy reports that states increasingly rely on third-party auditors — primarily Kelmar Associates LLC and Kroll Government Solutions LLC — with more than 20 states now using these types of compliance reviews. California itself launched a Voluntary Compliance Program in 2023 and mailed reminders to roughly 4,000 companies in late 2025, with follow-up letters sent in February 2026, the publication noted.
Political Stakes in a Statewide Race
Cohen, who was elected controller in 2022 after four years on the California State Board of Equalization, is seeking a second term against Republican challenger Herb Morgan in the November election, according to ABC7 News. Morgan said the court filing raises serious questions about Cohen's financial competence and judgment, arguing she demonstrated a lack of financial judgment and misunderstood her responsibility as California's chief fiscal officer, and that the state controller should protect people's money rather than treat it as revenue for Sacramento.
Cohen has countered that her administration has returned approximately $2 billion to Californians and worked to reduce a backlog in the unclaimed-property program, per the same station's reporting, which also notes an internal poll commissioned by Morgan's campaign showed him within single digits of Cohen — though the outlet cautioned the survey was conducted for his own campaign. California currently holds roughly $15.5 billion in unclaimed assets, and no Republican has won statewide office in the state since Arnold Schwarzenegger was reelected governor in 2006, ABC7 reported.
