Va. county sues firm that advises Portsmouth, Suffolk

An investment firm that Portsmouth, Suffolk and other Hampton Roads localities rely on for fiscal guidance has been sued by a Virginia county for nearly $19 million on allegations of fraud.

Davenport, a Richmond-based firm with roots dating to 1861, called the accusations by Fluvanna County's Board of Supervisors "absurd," without merit, and the result of politics.

Representatives from Suffolk and Portsmouth said this week they are monitoring the case. Portsmouth's City Council was briefed on the matter Tuesday, and City Attorney Tim Oksman released a statement that complimented the company and cautioned against believing the accusations.

He said that nothing in Fluvanna's lawsuit concerns him, as the allegations don't apply to any financing Portsmouth has done on Davenport's recommendation.

To his knowledge, "the advice we've received from Davenport has been sound," Oksman wrote. "The recent upgrade of our credit ratings by the major rating agencies is good evidence of the quality of financial advice we've been receiving."

Isle of Wight County and Franklin also use Davenport.

"Generally speaking, our board has been very happy with the advice and information that we receive from Davenport," Isle of Wight spokesman Don Robertson said.

Davenport's role as a financial adviser includes giving market advice, creating progress reports and recommending financial policies that appeal to the ratings agencies. David Rose, a company senior vice president who is named in Fluvanna's lawsuit, is often the representative who gives the presentations to the governing bodies in Hampton Roads that use the firm.

Fluvanna County is home to about 25,000 residents near Charlottesville. In its lawsuit, the Board of Supervisors accuses Davenport & Company of knowingly giving them bad advice in 2008 on which bonds to use to finance the construction of a high school.

The supervisors accuse Rose of urging the county to not participate in a pool of bonds offered by the Virginia Public School Authority. They claim that he told them they could not refinance the bonds if their interest rates dropped.

The county's lawsuit says Davenport is a minor underwriter for those state pool bonds, so the company could not have remained as Fluvanna's financial adviser had it used them because of professional conflict-of-interest rules.

The county accuses Rose of telling them to go with "standalone" bonds instead, which allowed the company to continue collecting financial advising fees, as well as additional refinancing fees, according to the lawsuit.

The county said in its suit that it will incur nearly $18 million in excess interest payments because of Davenport's advice.

Kathleen Holman, Davenport's chief administrative officer and executive vice president, said in an emailed statement that the company stands behind the advice it gave Fluvanna County, and said the record will show that the company presented several options and carefully explained each, including the costs.

Dave Forster, (757) 446-2627, dave.forster@pilotonline.com