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VA Supreme Court Reinstates Fluvanna Lawsuit Against Davenport - NBC29 WVIR Charlottesville, VA News, Sports and Weather

VA Supreme Court Reinstates Fluvanna Lawsuit Against Davenport

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Fluvanna supervisors claim they were duped into taking out almost $70 million in bonds in 2008 to build a new Fluvanna County High School. Fluvanna supervisors claim they were duped into taking out almost $70 million in bonds in 2008 to build a new Fluvanna County High School.

A multimillion-dollar legal battle between Fluvanna County's Board of Supervisors and its former financial advisor is back on the table.

The Virginia Supreme Court unanimously reinstated the lawsuit, which says these advisors misled the board and cost taxpayers millions.

Fluvanna County supervisors filed the suit against Davenport & Co. in September 2011. The complaint says the company "knowingly and negligently misled the Board in order to increase its own revenues at the expense of the Board and Fluvanna County's taxpayers."

Fluvanna County Attorney Frederick Payne said, "They advised the county to take actions that were not in the county's interest but were in their interest, maximized their compensation but didn't maximize the benefit to the county."

The board is suing Davenport & Co. on seven counts:

  1. Breach of Fiduciary Duty
  2. Actual Fraud
  3. Gross Negligence
  4. Constructive Fraud
  5. Unjust Enrichment/Disgorgement
  6. Breach of Contract
  7. Breach of Virginia Securities Act

Supervisors claim the company duped them into taking out almost $70 million in bonds in 2008 to build the new high school, which opened in August 2012.  The board chose to issue stand-alone bonds instead of pooling their bonds with other school districts that were looking to build schools.  It's a decision they say is now costing the county almost $18 million in excess interest payments.

Payne said, "$18 million is a general approximation of the difference between what the interest would have been over the entire life of the bonds as opposed to what it should have been had the county been advised properly."

Davenport & Co. was the board's financial advisor for more than 15 years.  Following the initial complaint, the company challenged the suit.  Davenport & Co. eventually filed an amended response, challenging the jurisdiction of Fluvanna County Circuit Court to try the case involving the action of the board of supervisors.  The circuit court dismissed the case, prompting Fluvanna County supervisors to appeal to the Virginia Supreme Court.

Payne says they would consider going back into mediation to settle the case.

"As long as we think that the county and the taxpayers' interest is protected, I think the county would be in favor of a settlement - save attorneys' fees, save time.  It gives certainty to the result, but that doesn't mean that we're not going forward with the case," he said.

Davenport & Co. sent NBC29 the following response:

The decision issued by the Virginia Supreme Court on Thursday, April 18, 2013 addressed only the preliminary question of whether Fluvanna County could bring an unusual suit like this. It still remains that the County's case has substantial legal and factual deficiencies.  Davenport continues to stand behind the advice given to the County and is confident it will prevail in the lawsuit.

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