Nov. 1, 2002 Nobody has struck oil in the Virgin Islands, but the territory is soon going to be in the oil business, according to Attorney General Iver Stridiron. This news comes as an unlikely result of a tax case the V.I. government pursued for 20 years and settled last week.
Gov. Charles W. Turnbull said in a release that the government will receive more than $10 million from the settlement reached by Stridiron and a team of lawyers from the V.I. Justice Department and the Internal Revenue Bureau.
The governor said the proceeds will be used to help fund recently negotiated salary increases for police officers.
While the parties finalized the negotiations in Long Beach, California, last week, however, there is no $10 million lump sum in the territorial coffers just yet.
The settlement is with a corporation which refused over the years to pay taxes claimed by the V.I. government. According to Stridiron and others familiar with the case, several corporations set themselves up as V.I.-domiciled businesses in the 1980s to take advantage of favorable tax laws. However, the Internal Revenue Bureau challenged the laws and took the corporations to court.
In a series of cases which ultimately reached the U.S. Supreme Court, the Virgin Islands prevailed, and all but one of the corporations ended up paying the taxes they owed the territory. And this is where the oil comes in.
"They fought us tooth and nail," Stridiron said of the principals of the sole holdout, "but we had decided that we would not go away, and we made it clear to them that we were serious." The corporation contested the assessments from 1982 to 1987, refusing to pay the taxes, and finally, in 1998, Stridiron said, the territory was able to file suit in 1998. The case was appealed from District Court in the Virgin Islands through the appellate system to the Supreme Court.
The target of the territory's efforts was no faceless corporate behemoth, but an older couple, "probably well into their eighties now," Stridiron said. Marianthi and William Lansdale did business in the Virgin Islands as a corporation called La Isla Virgen, which rolled over into an enterprise called Marina Pacific Co., which rolled over into Lonesome Dove Petroleum Co., which subsequently went into receivership, Stridiron said.
This last, winsomely named company, does, indeed, have oil holdings — in California, Texas, Oregon and Montana. And the Virgin Islands is now receiving royalties from the oil wells, which the government inherited when the company went into receivership.
The corporations domiciled themselves in the territory by establishing residency through obtaining business and driver's licenses, registering to vote and taking other actions to indicate they were legitimate businesses operating in the Virgin Islands, Stridiron said.
Under the operative law, "Domiciliaries of the V.I. did not have to pay taxes on income earned outside the territory," the attorney general said. The setup ultimately failed, he said, but not without a lot of work and a lot of time put in by the territory.
Stridiron said Joanne Bozzuto, former BIR director, who now lives in Florida, and John Zebedee, an assistant attorney general, pursued the case for 20 years. "They were doggedly going after everything," he said, even hiring private investigators in California.
The territory now has recovered $4.5 million from the sale of land from the Lansdale estate, Stridiron said. The estate's other assets include a family trust, which includes the oil and gas leases, and a mansion which "we sold for $1.5 million." He said, "We will have to liquidate some of those assets, and there is $3.8 million in cash thrown into the mix."
Stridiron said the V.I. legal team is "working with the Lansdales' lawyers for a tendering of all funds" owed. He said he consulted with the governor concerning terms of the settlement which will leave the Lansdales enough resources to live in comfort.
"We weren't going for the jugular," he said. "We didn't want to make them wards of the V.I."
The Lansdales were personal friends of former President Ronald Reagan, Stridiron said. The tax loophole came about through Reagan's influence in tax legislation, in the form of an amendment he had "thrown in to help a friend," the attorney general said.
Stridiron praised the efforts of all the V.I. team members who worked on the case. "When we went to Long Beach to negotiate, we had our own briefing books and materials in a pile almost 12 inches thick," he said. "When we sat with the tax lawyers, it was hot and heavy, intense negotiations."
He also lauded former Territorial Court Judge George Eltman, who served as mediator. "Without him, we could have gone to the negotiation table and said we wanted $15 million, and the Lansdales could have said they would pay only $1 million," Stridiron said. "Judge Eltman was really instrumental. His skill and persuasive way affected a fair settlement. We didn't put them in the poorhouse."
Stridiron also singled out the work of Richard Prendergast, Justice Department tax attorney. "I'm very proud of his work," the attorney general said. "I don't like tax law. I had to read volumes of pleadings to get to the point to get to the table. Prendergast stuck to his guns, and we can all be proud of our team."
Other team members were Kerry Drue, chief of the Justice Department's Civil Division, and Carol Thomas-Jacobs, assistant attorney general. Two Chicago tax attorneys, John Sopuch and Bart Higgins, assisted them.
On or about Nov. 15, Stridiron said, formal settlement documents will be executed by himself and the Lansdales. After that, the sums agreed upon last week will be deposited into the V.I. Treasury in the increments and at the intervals also agreed upon.
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