BUFFALO, N.Y. — On Thursday, New York Attorney General Letitia James announced the state has recovered $36 million from the clothing retailer H&M for unlawfully keeping funds from unused gift cards.
James said that the retailer has been withholding unused balances on gift cards that should have been transferred to the Office of Unclaimed Funds. She says H&M repeatedly lied to the state about the failure to transfer the money, saying that an out-of-state company was handling the gift cards.
“My office has zero tolerance for companies that disregard the law and line their pockets with money that belongs to hardworking people,” James said. "For years, not only did H&M illegally keep unused gift card money that customers paid for, but they then lied about it to the state. Violating the law is not trendy or tolerable, and today H&M will pay millions of dollars for its wrongdoing. New Yorkers can trust that my office will always stand up to unscrupulous companies and hold them accountable.”
New York law requires that after five years of inactivity that unused balances are transferred to the state’s Abandoned Property Fund, which is overseen by New York State Comptroller Thomas DiNapoli’s Office.
The Office of the Attorney General (OAG) opened an investigation after a whistleblower filed a lawsuit under the New York False Claims Act against the company. The OAG's investigation found that H&M was aware of the requirement to transfer unused gift card funds, but instead concealed its failure.
James said that in 2008, H&M entered into a contract with an out-of-state company and gave the false impression that the out-of-state company would conduct H&M's gift card business. That company did not take over the gift-card business and H&M continued to run it on its own.
The OAG says that H&M then lied to the state, saying the gift card balances had been transferred to the other company. H&M also caused a false letter to be sent to the state saying the out-of-state company had “paid out tens of millions of dollars” on H&M’s gift cards when the company knew this had not been done.
The state inquired again about the company's unused gift card funds and is said to have again made false statements to the state.
An agreement has been reached to resolve these false statements. H&M will pay more than $428 million to the state, $18 million of which will go towards the Abandoned Property Fund for unredeemed balances on gift cards from the retailer that were sold before 2015.
The whistleblower will receive $7.74 million for making H&M's misconduct known.
“New Yorkers with unused balances on their H&M gift cards now can recover their money under today's agreement,” DiNapoli said. “The Comptroller’s Office of Unclaimed Funds stands at the ready to assist those who have money coming to them. I thank Attorney General Letitia James and her office for their work to help my office hold companies accountable and ensure that unused gift card money goes to the consumer.”
