CA, Inc.'s Answer and Counterclaim - Reed Smith

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From the state tax library of Reed Smith LLPwww.reedsmith.com/DEtaxfor other related documents, please email ksollie@reedsmith.comState was obligated to accept payments for the reporting period of 1991 to 2001, and not seekamounts allegedly due prior to 1991.26. The VDA Notice of Intent further obligated the State to memorialize its promisesto CA by executing a standard VDA Agreement.27. In particular, pursuant to the standard VDA Agreement contemplated by the VDANotice of Intent, the State agreed expressly to release CA "from all claims, demands, interest,penalties, actions or causes of actions" that the State may have for the reporting period of 1991 to2001. As well, the State agreed to release CA "from any further reporting requirements of theDelaware Abandoned Property Law for the abandoned or unclaimed property identified, paidand delivered pursuant to this agreement, for [1991 to 2001] . . ., and for all preceding reportingyears."28. Further, the State agreed to "maintain the confidentiality of informationvoluntarily disclosed [by CA] and disclose only such information as provided in Section 1141,Chapter 11 of Title 12 of Delaware Code, or as otherwise required by law."29. Based upon the State's promulgated regulations regarding the VDA program, CAunderstood that, if it acted in good faith, the State would seek only those amounts of moneyproperly owed by CA to the State under the relevant escheatment laws. As CA has come tolearn, however, rather than operating in good faith to ascertain the amount of money actuallyowed, the State instead engaged in a bad faith and wholly inappropriate campaign of fabricatinginflated demands for the purpose of coercing CA to pay more than it rightfully owes the State.30. The State has failed to meet its obligations under the VDA, despite CA’s havingmet all of its obligations. Instead, and as set forth more fully herein, the State consistently hasasked CA to provide volumes of information that the State had no intention of reviewing, and- 42 –
From the state tax library of Reed Smith LLPwww.reedsmith.com/DEtaxfor other related documents, please email ksollie@reedsmith.commade demands in an arbitrary and capricious manner and without basis in law or fact, in order tocoerce CA to escheat more money to the State than the State knew was owed.CA's Self-Audit31. In order to help fulfill its obligations under the VDA, and to ensure that it wastaking all necessary and proper steps, CA retained independent consultants, originally with Ernst& Young LLP ("E&Y") and later Abandoned Property Services LLC (collectively "APS"), toconduct CA's self-audit and calculate the amount of abandoned and unclaimed property owed byCA to the State under the VDA.32. Despite knowing that the expense would be considerable, CA retained E&Y andlater APS to review and analyze CA's voluminous books and records for the relevant period inorder to report properly the amount of alleged abandoned and unclaimed property owed for therelevant period. CA had no obligation to do anything other than self-report its potentialobligations on its own. CA felt, however, that utilizing an experienced consultant would benefitboth the State and CA by providing for the most efficient resolution to the VDA.33. In addition, CA itself expended considerable time, effort and manpower inconnection with its self-audit. Specifically, a number of CA's finance department employeesdevoted significant resources to assist APS in calculating CA's alleged abandoned and unclaimedproperty liability, and temporary employees were hired in finance to expedite the review.34. On or about May 2005, given the size and extent of the task, CA requestedadditional time from the State to complete its self-audit, which the State readily granted.Although the VDA forms contemplate that the process is to be completed in six months, it rarelyif ever is the case that VDA processes are completed in that period of time. In normal instances,the VDA take much longer, often many years, before the process is complete.- 43 –
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CA, Inc.'s Answer and Counterclaim - Reed Smith

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