Doral, gov’t continue talks on tax refund dispute

Written by  //  August 25, 2014  //  Banking, Financial District  //  No comments

Print Friendly, PDF & Email
Doral and Treasury are working on an agreement regarding the tax refund. (Credit: © Mauricio Pascual)

Doral and Treasury are working on an agreement regarding the tax refund. (Credit: © Mauricio Pascual)

Despite word that court-ordered talks between the government and Doral Financial Corp. had broken down late Friday, representatives from both parties confirmed negotiations are still on the fate of a $229 million tax refund the bank is claiming from the government.

In separate statements, the parties said they continue to negotiate “in good faith.”

“Doral has not left the negotiations. The Treasury Department attempted on Thursday to introduce into the negotiations so-called ‘business points’ conceived by its new outside counsel, Foley & Lardner, that were contrary to the provisions of the agreement reached and sworn to by the parties in front of Judge Perez-Perez of the Court of the First Instance,” said Matthew D. McGill of Gibson, Dunn and Crutcher, which is representing Doral in the dispute that began several months ago.

Foley & Lardner recently represented Doral in a related matter and that raises a conflict of interest, he explained.

“It has a duty of loyalty to its client, Doral, from acting adversely to Doral. For that reason, Doral sought guidance from Judge Perez-Perez as to how to proceed,” he said.

“Judge Perez-Perez ruled that the parties will continue negotiations under her supervision, without the participation of Foley & Lardner, and according to the terms previously agreed by the parties,” McGill said.

Doral filed a lawsuit against Treasury — as well as Treasury Secretary Melba Acosta — in June asking the court to enforce the so-called Closing Agreement dated March 26, 2012 through which Treasury reportedly agreed to refund the bank for the amount representing overpaid taxes. Earlier this year, Treasury announced it had decided to nullify the refund.

In the civil suit filed in Superior Court, the holding company of Doral Bank claimed — as it has repeatedly over the past two weeks — that Treasury’s determination to nullify an agreement signed in 2012 granting the refund “was not only unlawful and beyond its authority, but if upheld, it would undermine the ability of the department to negotiate future agreements and undercut the reliability of all contracts and promises made by agencies of the Commonwealth.”

On Friday, the government reiterated its efforts to reach a settlement with Doral.

“The Puerto Rico Department of Treasury and the Department of Justice continue to work in good faith to reach a settlement with Doral that is in the best interests of the Commonwealth, while adhering to all applicable laws and regulations in agreement with the Court’s instructions,” the government said in a statement.

“All of the Treasury’s advisors, including Foley & Lardner LLP, were vetted through a robust conflict check procedure.  As confirmed by Foley, according to Florida’s Rules of Professional Conduct, there is no conflict of interest in Foley continuing to advise Treasury and the Government Development Bank for Puerto Rico on matters related to federal taxation and securities laws, including those relevant to the negotiation and a potential settlement with Doral Financial Corporation,” the government said.

“When Doral first hired Foley, Doral affirmatively waived in writing potential conflicts of interest.  The facts do not support Doral’s allegations that there is a conflict of interest in this instance,” it further noted.

“The Judge of First Instance ruled that negotiations will continue today, and that only litigation attorneys for Treasury and Doral will be present. No legal advisors to Treasury or Doral, other than litigation attorneys, will be present in the meeting, but will be in nearby rooms advising their clients. Foley will continue to provide Treasury and GDB with advice on matters related to federal taxation and securities laws,” the government concluded in its statement.

Leave a Comment

comm comm comm