The V.I. Government filed a $13.6 million lawsuit Monday against its law firm, Buchanan, Ingersoll & Rooney PC, and its financial advisor, Bank of America, for bad tax advice the territory relied on, only to be dunned for millions by the U.S. Internal Revenue Service.
The lawsuit filed in U.S. District Court charges Buchanan Ingersoll and Bank of America incorrectly advised the government and Public Finance Authority that a $219 million, 2006 bond issue was tax exempt. In March 2012, the IRS determined the government should not have used $80 million of the tax exempt bond revenues to refinance/retire some 1999 bonds at lower interest, because the tax exempt bonds could only be used for working capital. The IRS demanded a $13.6 million payment and in 2013 the Legislature approved more bond funding, setting aside a portion for the IRS settlement. (See Related Links below)
The suit filed Monday seeks to recover the $13.6 million payment to the IRS and all related costs including, among other things, professional fees and expenses and costs related to financing the IRS settlement. [PFA v. BofA Complaint]
“When advisors’ failure to provide proper advice damages their client, those advisors must stand behind them,” PFA attorney David Stone said in the statement from Government House.
"The V.I. government has been financially penalized as a result of the poor advice of our former advisors,” Gov. John deJongh Jr. said. “We have brought this lawsuit to ensure that the burden of this result is shouldered by those responsible and not by our local taxpayers.”
