21 States Sue Delaware for Stealing Their Money

Twenty-one states are teaming up against Delaware in a new Supreme Court case, claiming the tiny state for years stole checks that should have gone to other states.

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"Delaware has our money," Texas Attorney General Ken Paxton said at a news conference outside the Supreme Court in Washington on Thursday. He said the amount owed to the coalition is over US$150 million and could total as much as US$400 million of unclaimed money for 49 states.

Paxton said under federal law, unclaimed official checks, traveler's checks and money orders go to the state where the financial transaction was initiated. This means that if an unclaimed official check purchased in Texas remains unclaimed, the proceeds should go to Texas.

But a couple of years ago, Paxton said Delaware began playing by a different set of rules whereby the proceeds of unclaimed checks from financial institutions incorporated in Delaware were sent to Delaware no matter where the transaction was initiated.

"This practice not only violated federal law, but it is wrong and it is unfair," said Paxton, a Republican.

For Delaware, unclaimed money and property is an important source of cash to plug budget holes, and it accounts for 13 percent of the state's annual revenue.

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In the lawsuit led by Texas and Arkansas, the states allege that Delaware and global financial transaction firm MoneyGram violated federal law by sending uncashed MoneyGram checks to Delaware instead of returning them to where they were purchased.

Dallas-based MoneyGram said in a statement: "This is a dispute among states over which state has the priority to property escheated to the State of Delaware in good faith by MoneyGram."

The Lone Star Project, a left-leaning Texas-based advocacy group, said Paxton may have launched the lawsuit to deflect attention at home from his indictments for securities fraud.

Paxton is facing two security fraud charges related to stock sales and compensation from a Texas technology firm. He also faces charges that he acted illegally as a securities agent for a separate firm.

Paxton could face up to 99 years in prison if convicted.