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Fluvanna v. Davenport Complaint

Fluvanna v. Davenport Complaint

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Published by: brothamel on Sep 08, 2011
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09/23/2011

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VIRGINIA:
BOARD
OF SUPERVISORS
OF
FLUVANNA
COUNTY
Plaintiff,
v.
DAVENPORT
&
COMPANY
LLC
Defendant.
SERVE:
Winfred
Eddins, Jr.,
Registered
Agent
901E.
Cary
Street
Suite
100
Richmond,
Virginia
23219-0000
IN
THE
CIRCUIT
COURT
OF
FLUVANNA COUNTY
)))
)
case
No.
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COMPLAINTThe
Board
of
Supervisors
of
Fluvanna
County
(the"Board"),
by
counsel,
Complaint
against
Davenport
&
Company
LLC
("Davenport"),
states as
follows:
for
its
Introduction
1.
This
is
an
action
for
damages caused
by Davenport's
gross
violations
of
its
duties
to
the
Board,
contractual
and
otherwise,
in
connection
with
investment advisory
services
generally
and
the
issuance
of
nearly
$70
million in
bonds
specifically.As
described
in
more
detail below,Davenport,
in
its fiduciary
capacity,
knowingly
ornegligently misled
the Board
in
order
to
increase
its own
revenues at
the
expense
of
the Board
and
Fluvanna
County's
taxpayers.
These actions
have
significantly
damaged
Fluvanna County,
Virginia
("Fluvanna
County")
and
its
taxpayers,
for
which theBoard
seeks
herein
compensatory
damages,
punitive
damages,
disgorgement
of
fees,
pre-
andpost-judgmentinterest,
costs
and such
further
relief
as
the
Court
 
may
deemappropriate,
including
reasonable
attorneys'
fees
to
the
extent
permitted
by
Virginia
law.
Jurisdiction
andVenue
2.
Fluvanna
Countyis
a
rural
Virginia
county
with
anapproximate2010
populationof25,691.
3.
Davenport,
a
limited
liability
company,
is
a
Virginia-domiciled
and
licensedsecuritiesbroker-dealer
and
registeredinvestmentadvisor.
4.
This
Court
has
jurisdictionoverthe
parties
and
the
subject
matter
basedoncommon
law
and
on the
Virginia
Securities
Act
(the
"Act").
5.
Venue
in
this
Court
is
proper
because
the
causes
of
action
in
this
Complaint
accrued
in
Fluvanna
County
and
because
Davenport
regularly
transactsbusiness
in
FluvannaCounty.
Facts Commonto
All
Counts
6.
For more than
fifteen
years,
Davenport
has acted
as
the
Board'sfinancial
advisor,
for which
it
was
duly
compensated.
7.
David
P.
Rose
("Rose"),Davenport's
Senior
Vice
President
and
Manager
of
Davenport
Public
Finance,has beenthe
key
contact
person
onbehalf
of
Davenport
throughoutthis
period.
OtherDavenportemployees
assistedRose
from
timeto time.
8.
Each and
every
act
or
omissiontaken
by
Rose and
his
colleagues,
with
respect
tothe Board,wastaken
in
the
courseand scope
oftheir
employment
with
Davenport
and
was eitherauthorized
in
advance,
or
ratified, by
Davenport.
g.The
Board
reasonably
relied
on
Davenport's
representations
and
recommendations.Suchreliancewas
particularly
reasonable
in
light
of
the
long-standing
 
relationship
between
Davenport
and
the
Board.
Rose
unlawfully
exploited thatrelationship
in
order
to
enrich
himself
and Davenport
at the
expense
of
their client, the
Boardand
FluvannaCounty
and
its
taxpayers.
10.
During this
period,
Fluvanna
County'spopulationwasgrowing
and
Fluvanna
County thus
needed
to
expand
its
infrastructure.
The
most
costlyinfrastructure
expansion
wasthe
construction of
a
new
high
school(the
"Project").
11.
The Board
sought
advice
in
connection
with
thefinancing
of
the
Project
and
Davenportemphasized
its
expertise,
its
professionalism
and
its
experience
in
workingwith
Virginia
goveming
bodies,
particularly
FluvannaCounty.
12.
At
the
time,
Davenport
was already
theBoard's
financial
advisor
and
it
used
itsfiduciarypositionto
persuade
the Board
to
select
Davenport
for
the Project.
13.
The Board reasonably
relied
on
Davenport's
written
and
verbalrepresentations
in
selecting
Davenport.
It
later
learned
that
many
of
these
representations
were
knowingly
false
and were made
solely
for
the
purpose
of
securing
Fluvanna
County's
business
and enriching
Davenport
andRose.
14.
At
Rose's
urging,theBoard
issued
stand
alone bonds
to
finance
the Project
(the"stand alone
bonds"),
rather than
participating
in
a
pool
of
bonds
(the
"pool
bonds")offeredby
the Virginia Public
School
Authority(the
"VPSA")
or
seriously
considering
any
other
alternatives.
A
partof
Rose's argument was that Fluvanna
County could not
refinancethe
bonds
if
it
participated
in
the
pool,
a
desirable
action
if
interest rates
dropped.
This
specificrepresentation
by
Rose,
on
which
the Board
reasonably
relied,
was
knowingly
material
and false.
15.
On
August
6,2008,
Davenport
made
a
presentation
to
theBoardshowing that the
estimated
all-in
borrowing cost
for
a
stand alone
issuance
was 4.87
percentversus
the
pool

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