Virgin Islands files suit to recover costs for $219 million bond issue

By Susanna Moon

Chicago, Oct. 20 – The Virgin Islands Public Finance Authority and the government of the U.S. Virgin Islands are suing Buchanan, Ingersoll & Rooney PC and Bank of America related to the issue of more than $219 million of bonds in 2006 that were to have been tax-exempt, according to a press release.

The Virgin Islands filed a multimillion-dollar malpractice lawsuit seeking punitive and compensatory damages for the failure of its law firm Buchanan, Ingersoll and its financial adviser Bank of America to properly advise in the issue.

The government said the companies advised that the bond issue would be tax-exempt, but that at least $80 million of the $219 million issue failed to qualify for tax-exempt status during a recent random IRS examination, the release said.

The IRS then sought a $13.6 million dollar payment to resolve the claim, the government said.

The suit alleges malpractice by Buchanan Ingersoll as well as claims for negligence, breach of fiduciary duty and breach of contract against both Bank of America and Buchanan Ingersoll, the release said.

The suit reportedly arises out of the IRS’s claim that $219 million of tax exempt municipal bonds the government issued in 2006 did not qualify for tax exempt status, despite the fact that Buchanan Ingersoll had issued an unqualified opinion letter stating otherwise, and Bank of America had advised on the bond issue.

The government is now seeking to recover the $13.6 million payment to the IRS and all related costs.

The suit was filed in the United States District Court of the Virgin Islands.

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